FASB Grant Accounting Proposal Issued

August 14, 2017

The Financial Accounting Standards Board (“FASB”) is proposing new guidance for contributions made or received by organizations, especially nonprofits. The proposed Accounting Standards Update (“ASU”) will help decide whether an organization’s transactions are treated as either a contribution or an exchange. This would be achieved by clarifying guidance on assessing whether a resource provider receives value in exchange for the transferred resources.

The proposal also provides an improved framework that helps organizations decide whether a contribution is conditional or unconditional. In addition, the proposed amendments help distinguish between a donor-imposed condition and a donor-imposed restriction.

Transfers of assets from a government entity to a business would not be impacted by the proposal. However, the guidance would impact recipients of contributions received and resource providers of contributions made.

Following the same effective dates as Accounting Standards Codification 606, Revenue from Contracts with Customers, the proposed amendments would apply to a public company or nonprofit’s annual reporting periods, including interim periods within, starting after December 15, 2017. All other entities would have to apply the final standard to annual reporting periods starting after December 15, 2018, and interim periods within those periods starting after December 15, 2019. Early adoption would be allowed.

Comments on the proposed changes are due Wednesday, November 1.