The Financial Accounting Standards Board issued a proposed Accounting Standards Update to improve the guidance for accounting for contributions made and received.

While the proposed changes would primarily affect nonprofit organizations, the board noted that they would “apply to all organizations that make or receive contributions of cash or other assets, including business enterprises.”

The proposed guidance would help organizations determine if transactions should be accounting for as contributions or as exchanges, which would depend on whether the contributor received value in return for the resources transferred. The ASU includes an improved framework for determining whether a contribution is conditional or not, and to better distinguish between donor-imposed conditions and donor-imposed restrictions.

FASB, GASB and FAF logos on the wall at headquarters in Norwalk, Connecticut
Courtesy of GASB

“Stakeholders indicated that there is difficulty and diversity in practice among not-for-profits with characterizing grants as exchanges or contributions, and in distinguishing between conditional and unconditional contributions” said FASB Chairman Russell Golden in a statement. “The proposed ASU provides not-for-profits with a more robust framework to evaluate and determine if a transaction should be accounted for as a contribution or an exchange. This will help organizations more consistently apply the guidance, and would make the accounting for contributions more operable.”

The proposed amendments would not apply to assets transferred from the government to a business.

For more details, see the proposed ASU, and a related FASB in Focus.

The deadline for comments is Nov. 1, 2017.

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