FASB Issues Standard for Contributions

June 25, 2018

A new Accounting Standards Update (“ASU”) by the Financial Accounting Standards Board (“FASB”) will have a significant impact on financial statements of entities who receive grants. ASU No. 2018-08, Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, differentiates grants and similar contracts with government agencies and others as reciprocal transactions (exchanges) or nonreciprocal transactions (contributions). The new standard also establishes new indicators for when a contribution is conditional.

The amendments in ASU No. 2018-08 apply to all entities that receive or distribute contributions, but they do not apply to transfers of assets from governments to companies. Public companies and nonprofits that have issues, or is a conduit bond obligor for, securities traded, listed, or quoted on an exchange or an over-the-counter market will apply ASU No. 2018-08 for transactions wherein the company or nonprofit is a resource recipient to annual reporting periods (including interim periods within those reporting periods) starting after June 15, 2018.

If a public company or nonprofit serves as a resource provider in such transactions, the amendments will be applied to annual reporting periods starting after December 15, 2018 (including interim periods within those reporting periods). Other entities will apply the standard to annual reporting periods starting after December 15, 2019, and interim periods within annual periods starting after December 15, 2019.

Entities can apply the amendments early.