FASB Issues a Proposed Standard To Clarify the Characterization of Grants as Exchanges or Contributions

Proposed Standard Addresses Diversity in Accounting Practice for Grants as Exchanges or Contributions and in Distinguishing Between Conditional and Unconditional Contributions.

On August 2, 2017, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standard Update (ASU) intended to clarify and improve the scope and the accounting guidance for contributions received and made, primarily by not-for-profits. Stakeholders are asked to review and provide comment on the proposed ASU by November 1, 2017.

The proposed guidance is intended to help organizations decide if transactions should be accounted for as a contribution (non-reciprocal transactions) or an exchange (reciprocal) transactions. Organizations would accomplish this by using clarifying guidance to evaluate whether a resource provider is receiving value in return for the resources transferred.

The proposed ASU also helps organizations evaluate such arrangements by using an improved framework to determine whether a contribution is conditional or unconditional, and better distinguish a donor-imposed restriction.
Currently, diversity in practice occurs for grants and other similar contracts from various resource providers including government grants and contracts and resources from private foundations.

Effective Date
The proposed standard follows the same effective dates as the Revenue Recognition Standard:

  • A not-for-profit organization that is considered a public company; i.e., a conduit debt obligor, would apply the new standard to annual reporting periods beginning after December 15, 2017.
  • Other NFPs would apply the standard to annual reporting periods beginning after December 15, 2018.

Early adoption of the amendments in this proposed ASU would be permitted.

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