The Financial Accounting Standards Board (FASB) has proposed improvements designed to clarify and improve the accounting for grants and contributions (received and made), primarily by not-for-profits.
The FASB ‘s proposed Accounting Standard Update (ASU) helps organizations decide if transactions should be accounted for as a contribution or an exchange. The proposed ASU includes 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 introducing an improved framework to determine whether a contribution is conditional or unconditional, and better distinguish a donor-imposed condition from a donor-imposed restriction.
Accounting for contributions is an issue primarily for not-for-profit organizations because contributions are a significant source of revenue. However, the amendments in this proposed ASU would apply to all organizations that receive or make contributions of cash and other assets, including business enterprises.
The proposed amendments would not apply to transfers of assets from the government to businesses. The guidance would apply to both a recipient of contributions received and a resource provider of contributions made.
The proposed standard follows the same effective dates as ASC Topic 606, Revenue from Contracts with Customers:
- A public company or a not-for-profit organization 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 would apply the new standard to annual reporting periods beginning after December 15, 2017, including interim periods within that annual period.
- Other organizations would apply the standard to annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.
Early adoption would be permitted irrespective of the early adoption of the amendments in ASC Topic 606.
Stakeholders are asked to review and provide comment on the proposed ASU by November 1, 2017.
The proposed ASU is available on Accounting Research Manager (login required).
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