The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. ASU No. 2018-08 provides clarifying and amended guidance concerning:
- the determination of whether a transaction should be accounted for as an exchange or as a contribution, and
- whether a contribution received is conditional or unconditional.
Determining Whether the Transaction is an Exchange or a Contribution
Guidance has been added concerning how an entity should determine whether, in a transfer of assets (or a reduction, settlement or cancellation of liabilities), a resource provider is participating in an exchange transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred. FASB ASC 958-605 now clarifies that the guidance concerning contributions received does not apply to transfers of assets—typically from a government entity—that are part of an existing exchange transaction between a recipient and an identified customer. In such instances, other applicable guidance (e.g., FASB ASC 606) should be applied to the underlying transaction with the customer, and the payments from the third parties should be considered as payments on behalf of the customer.
Determining Whether the Contribution Received is Conditional or Unconditional
Guidance has been added requiring an entity to determine whether a contribution contains a donor-imposed condition based on whether the agreement includes both (1) a barrier that must be overcome, and (2) either a right of return of assets transferred or a right of release of a promisor’s obligation to transfer assets.
After a contribution has been deemed not to contain a donor-imposed condition, an entity must still determine whether the contribution is restricted.
Effective Date for Public and Certain Not-For-Profit Entities
For a public business entity or a not-for-profit that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market:
- for transactions in which the entity serves as a resource recipient, for contributions received in annual periods beginning after June 15, 2018, including interim periods within those annual periods, and
- for transactions in which the entity serves as a resource provider, for contributions made in annual periods beginning after December 15, 2018 (i.e., calendar-year 2019), including interim periods within those annual periods.
Effective Date for All Other Entities
For transactions in which an entity serves as a resource recipient, for annual periods beginning after December 15, 2018 (i.e., calendar-year 2019).
For transactions in which an entity serves as a resource provider, for annual periods beginning after December 15, 2019 (i.e., calendar-year 2020).