Forthcoming Revenue Standard Proposal to Help Nonprofits
New Financial Accounting Standards Board (“FASB”) guidance could make it easier for nonprofits to record revenue from grants and donations with restrictions. On June 7, the FASB unanimously agreed on a proposal to help nonprofits differentiate between a condition and a restriction in U.S. GAAP for received grants and donations.
Accounting Standards Update No. 2014-09, Revenue From Contracts With Customers (Topic 606) removed guidance on “exchange” transactions. Furthermore, many nonprofit organizations have had trouble distinguishing between a condition and restrictions. To address the matter, the FASB will clarify that when a gift comes with a donor-imposed condition, the agreement must include either a right of return or release provision. The agreement must also specify that the nonprofit will not receive the donation if it fails to meet the condition.
The proposal is expected to be released next month, followed by a three-month comment period. The extended comment period gives nonprofits with year-end reporting requirements on June 30 more time to provide feedback.
Topics: Accounting Standards Update "ASU", Charitable Giving, FASB, Financial Accounting Standards Board "FASB", Nonprofits, Revenue from Contracts with Customers (Topic 606), Revenue Recognition, U.S. GAAP