The Fair Value Option Subsections of Subtopic
825-10 create a
fair value option under which a
not-for-profit entity (NFP) may irrevocably elect fair value as the initial and subsequent measure for most receivables.
If an NFP elects to measure a receivable at fair value and uses a present value technique to measure fair value, the discount rate assumptions, and all other elements discussed in paragraph 820-10-55-5 shall be revised at each measurement date to reflect current market conditions. Paragraph 820-10-35-2B states that a fair value measurement takes into account the effect of a restriction on the sale or use of an asset if market participants would take into account the effect of the restriction when pricing the asset. Example 6 (see paragraph 820-10-55-51) illustrates that restrictions that are a characteristic of an asset and, therefore, would transfer to a market participant are the only restrictions reflected in fair value. Donor restrictions that are specific to the donee are reflected in the classification of net assets, not in the measurement of fair value. Receivables arising from exchange transactions shall be reported at net realizable value if the amounts are due within one year.
See Example 1 (paragraph
958-310-55-1) for a summary of the guidance for accounting for changes in the value of promises to give subsequent to initial recognition but before collection.
No increase in net assets shall be recognized if the value of a contribution receivable increases because of a change in the quantity or nature of assets expected to be received between the date the unconditional promise to give is recognized and the date it is collected, except as provided in the following paragraph.
If the value of a contribution receivable increases because of changes in the quantity or nature of assets expected to be received and previous decreases in the value of that unconditional promise to give resulted in expenses or losses from bad debts, the increase shall be reported as a recovery of those expenses or losses to the extent that those expenses or losses were previously recognized. The recovery shall be reported in the net asset classes in which the net assets are represented.
Amounts collected, other than a recovery of bad debt expenses or losses, in excess of the carrying amount of contributions receivable shall be reported as contribution revenue in the appropriate net asset class.
The value of a contribution receivable arising from an unconditional promise to give noncash assets other than equity securities with readily determinable fair values or debt securities may change between the date the unconditional promise to give is recognized and the date the asset promised is received because of changes in the future fair value of the underlying noncash assets. For purposes of subsequent measurement, the method for determining the future fair value of the underlying noncash asset shall be the same as the method used for determining that amount for purposes of initial measurement. Accordingly, assumed relationships, such as the relationship between the market price of the noncash asset at the time the initial measurement is made and its projected market price at the date the asset is expected to be received, shall be presumed to continue in determining whether the future fair value of the underlying noncash asset has changed.