The following table identifies the changes made to this Subtopic.
This Subtopic provides guidance about a type of receivable unique to
not-for-profit entities (NFPs)—
promises to give (
contributions) receivable. NFPs also shall apply the initial recognition and measurement standards for promises to give in Subtopic
958-605.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
958-10-15.
An
unconditional promise to give shall be initially measured in accordance with paragraphs
.
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.
As illustrated in paragraph
958-605-55-22, the allowance for uncollectible promises to give does not include amounts determined to be uncollectible when the contributions receivable were initially measured.
For example, assume that, on the last day of its fiscal year, a not-for-profit entity (NFP) receives promises to give $100 in 5 years, that the estimated future cash flows from the promises are $70, and that the present value of the estimated future cash flows is $50. The notes to financial statements should disclose unconditional promises to give of $70 and unamortized discount of $20. If unconditional promises to give are subsequently measured at
fair value, the notes to financial statements shall also include the following disclosures:
- a
Disclosures required by paragraphs and in the format described in paragraph 820-10-50-8 - b
Disclosures required by paragraphs - c
Disclosures required by paragraph 825-10-50-32, if an election to report unconditional promises to give is made after initial recognition pursuant to paragraph 825-10-25-4(e).
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Reason for the Change in Fair Value Underlying Asset Change in Collectibility of the Receivable Change in the Fair Value of the Underlying Asset Increase in Fair Value Decrease in Fair Value Increase in Future Fair Value \"Decrease in Future Fair Value\" Cash No adjustment (a) Recognize expense or loss (bad debt) Not applicable Not applicable Securities (b) No adjustment (a) Recognize expense or loss (bad debt) Recognize additional contribution revenue Recognize a decrease in contribution revenue Other assets No adjustment (a) Recognize expense or loss (bad debt) No adjustment Recognize a decrease in contribution revenue (a)\t\"Recoveries of previously recognized decreases in fair value resulting from changes in estimates of collectibility (up to the amount of decreases previously recognized), however, shall be recognized as reductions of bad debt expense or loss.\" (b)\t\"For purposes of this table, securities are defined as equity securities with readily determinable fair values and all debt securities, consistent with the use of the terms in Subtopic 958-320.\"