ASC

ASC 405-958

Not-for-Profit Entities

405 Liabilities

Download JSONDownload Markdown12 paragraphs · 9 sectionsJump to summary

Source downloaded: .Record version f635772f3a0e. Effective date must be checked in the source.

In brief

IntermediateNot-for-profitSubsequent measurementDisclosureRecognition

This Subtopic addresses how a not-for-profit entity accounts for its own liabilities, principally unconditional promises to give (grants/pledges the NFP makes to others). It fixes the discount rate used in a present-value measurement at initial recognition (no revision unless the fair value option under 825-10 is elected), requires discount amortization to be reported in the same functional expense classification as the original promise, and requires a maturity schedule disclosure. It also cross-references guidance for donated assets transferred to intermediaries/agents and for refundable membership interests of social and country clubs.

Key points (7)
  • Recognition of liabilities from transfers of donated assets to intermediaries and agents follows 958-605-25-23 through 25-24, with initial measurement in 958-605-30-13 (405-958-25-1; 405-958-30-1).
  • Initial measurement of liabilities arising from making promises to give is governed by 720-25-30-1 through 30-2 (405-958-30-2).
  • If present value of amounts to be paid is used to measure the fair value of an unconditional promise to give at initial recognition (per 835-30-25-10 through 25-11), the discount rate is set at initial recognition and shall not be revised unless the promise is remeasured at fair value under the Fair Value Option Subsections of 825-10 (405-958-35-1).
  • Amortization of discount on unconditional promises to give is reported in the same functional expense classification in which the promise was initially reported (405-958-45-1).
  • Notes must include, in addition to 450-20-50 disclosures, a schedule of unconditional promises to give showing amounts payable in each of the next five years, the aggregate due in more than five years, and the unamortized discount for promises reported at present value (405-958-50-1).
  • Membership interests such as capital shares issued by an NFP social or country club that are wholly or partially refundable on death, relocation, resignation, or at a fixed date are addressed by Subtopic 480-10 (405-958-25-3).
  • NFPs that must engage an independent review entity for five years under a Medicare fraud settlement agreement look to Section 954-405-25 (405-958-60-1).

For students. Watch the direction of the promise: this Subtopic covers promises the NFP makes (a liability), while 958-605 covers promises received (a receivable/contribution). The classic trap is revising the discount rate in later periods — the rate is locked in at initial recognition unless the fair value option is elected, and the discount amortization stays in the original functional expense line rather than becoming interest expense.

unconditional promise to givepresent value measurementfixed discount ratediscount amortizationfunctional expense classificationmaturity schedule disclosureagent and intermediary transfersrefundable membership interests

Machine-generated study aid for ASC 405-958. Check the source paragraphs below.

405-958-00Status

Source downloaded: .Record version 08766aca1731. Effective date must be checked in the source.

405-958-05Overview and Background

Source downloaded: .Record version 1e850599978c. Effective date must be checked in the source.

405-958-05-1
This Subtopic provides guidance about promises to give made by not-for-profit entities (NFPs). NFPs also shall comply with the applicable standards in Subtopic 720-25. This Subtopic also identifies the Sections within the Not-For-Profit Entities Topic that provide guidance on accounting for liabilities.

405-958-15Scope and Scope Exceptions

Source downloaded: .Record version 294fd4ae9976. Effective date must be checked in the source.

Overall Guidance

405-958-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 958-10-15.

405-958-25Recognition

Source downloaded: .Record version f293e7ffd0ed. Effective date must be checked in the source.

405-958-25-1
For recognition guidance on liabilities that result from transfers of donated assets to intermediaries and agents, see paragraphs
958-605-25-23 through 25-24
.
405-958-25-3
A not-for-profit entity (NFP) that is a social or country club may issue membership interests, such as capital shares. If those interests are wholly or partially refundable when the member dies, moves away, resigns his or her membership, or at a fixed date, Subtopic 480-10 provides guidance.

405-958-30Initial Measurement

Source downloaded: .Record version cbe890723a0c. Effective date must be checked in the source.

405-958-30-1
For initial measurement guidance on liabilities that result from transfers of donated assets to intermediaries and agents, see paragraph 958-605-30-13.
405-958-30-2
For initial measurement guidance on liabilities that result from making promises to give, see paragraphs
720-25-30-1 through 30-2
.

405-958-35Subsequent Measurement

Source downloaded: .Record version 86b6c0f6453d. Effective date must be checked in the source.

Liability for Promises to Give

405-958-35-1
If the present value of the amounts to be paid is used to measure fair value of an unconditional promise to give at initial recognition, in conformity with paragraphs
835-30-25-10 through 25-11
, the discount rate shall be determined at the time the unconditional promise to give is initially recognized and shall not be revised, unless the promise to give is subsequently remeasured at fair value pursuant to the Fair Value Option Subsections of Subtopic 825-10.

405-958-45Other Presentation Matters

Source downloaded: .Record version 95dd88d8ffab. Effective date must be checked in the source.

Liability for Promises to Give

405-958-45-1
The amortization of any discount related to unconditional promises to give shall be reported in the same functional expense classification in which the promise to give was initially reported.

405-958-50Disclosure

Source downloaded: .Record version 38e92964f1e8. Effective date must be checked in the source.

Liability for Promises to Give

405-958-50-1
In addition to disclosures required by Section 450-20-50, the notes to financial statements shall include a schedule of unconditional promises to give that shows the total amount separated into amounts payable in each of the next five years, the aggregate amount due in more than five years, and for unconditional promises to give that are reported using present value techniques, the unamortized discount.

405-958-60Relationships

Source downloaded: .Record version b9ac578d37d6. Effective date must be checked in the source.

Health Care Entities

405-958-60-1
For guidance for not-for-profit entities (NFPs) that have entered into settlement agreements with the U.S. government regarding allegations of Medicare fraud that impose an obligation on the entity to engage an independent review entity to test and report on compliance with Medicare requirements each year for five years, see Section 954-405-25.

Related subtopics