# ASC 720-958-05: Other Expenses — Not-for-Profit Entities — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/720/958/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:7a88cb4352b4a16f4ed6f1fd8bfba1ba43b633a6e8f5a5692cde1d961eeae973 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-958-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/958/#05-overview-and-background) SEC content: no ##### [720-958-05-1](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:d7018b36b358c6ed983aac1642c4329895255ae6cb731611533560a50a8c208e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on reporting expenses for [not-for-profit entities](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFPs). The guidance in this Subtopic is presented in the following three Subsections: 1. a General 2. b Accounting for Costs of Activities that Include Fundraising 3. c Services Received from Personnel of an Affiliate. ##### [720-958-05-2](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:3fe8a25bb98f8a9669e5cca899980d06dd6668e94ea7326cb85005918124ba67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsections provide incremental guidance on the following subjects: 1. a The functional classification of expenses 2. b The natural classification of expenses 3. c [Contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") made 4. d Fundraising costs 5. e Premium costs 6. f Advertising costs 7. g Reductions in amounts charged for goods and services (discounts) 8. h Cost of sales 9. i Costs of occupancy and maintenance 10. j Interest costs 11. k Payments to affiliated NFPs 12. l Expenses of federated fundraising organizations. ##### [720-958-05-3](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:807f7652ae7b4989cf61ecd0ab7ae05b78577cd61f4127b227b8f2d5a841cd73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For additional information about the presentation of expenses in a statement of activities, see Section 958-220-45. ##### [720-958-05-4](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:5b95f63fb1ab10a455df65ff15c5e42b6bdd43e16717007e8f10105f2c37cc3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An NFP produces and distributes goods and services by using resources. It obtains some of the resources it uses by paying cash, some by incurring liabilities, and some by contribution. Some of its resources (assets) are used up in providing services at the time they are received, others are used up at a later date, and still others are used up gradually over time. Using up assets in providing services (or otherwise) has a cost whether those assets have been acquired in prior periods or in the current period and whether acquired by paying cash, incurring liabilities, or by contribution. To help explain the relationships of an NFP's ongoing major or central operations and activities, a statement of activities shall report the gross amounts of revenues and expenses pursuant to paragraph [958-220-45-14](https://asc.understandingaccounting.org/asc/220/958/#220-958-45-14). To help donors, creditors, and others in assessing an NFP's service efforts, including the costs of its services and how it uses resources, a statement of activities or notes to financial statements shall provide information about expenses reported by their functional classification such as major classes of [program services](https://asc.understandingaccounting.org/glossary/p/#program-services "The activities that result in goods and services being distributed to beneficiaries, customers, or members that fulfill the purposes or mission for which the not-for-profit entity (NFP) exists. Those services are the major purpose for and the major output of the NFP and often relate to several major programs.") and [supporting activities](https://asc.understandingaccounting.org/glossary/s/#supporting-activities "Supporting activities are all activities of a not-for-profit entity (NFP) other than program services. Generally, they include the following: Management and general activities Fundraising activities Membership development activities."). ### Accounting for Costs of Activities that Include Fundraising ##### [720-958-05-5](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:5aaeadf93abe677c2954c22119b41cec58c9d98dd03b327fed3b7f3d1aaeeab6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Accounting for Costs of Activities that Include Fundraising Subsections provide guidance for reporting costs as program or management and general in circumstances in which those [activities](https://asc.understandingaccounting.org/glossary/a/#activities "Activities are efforts to accomplish specific objectives. Some activities include producing and distributing materials. For example, if a not-for-profit entity (NFP) undertakes a mass mailing that includes a letter and a pamphlet, producing and distributing the letter and pamphlet are part of the activity. Other activities may include no materials, such as an annual dinner or a radio commercial.") are combined with [fundraising activities](https://asc.understandingaccounting.org/glossary/f/#fundraising-activities "Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time."). Some [not-for-profit entities](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFPs) solicit support through a variety of fundraising activities, including the following: 1. a Direct mail 2. b Telephone solicitation 3. c Door-to-door canvassing 4. d Telethons 5. e Special events 6. f Others. Sometimes fundraising activities are conducted with activities related to other functions, such as program activities or supporting services, such as [management and general activities](https://asc.understandingaccounting.org/glossary/m/#management-and-general-activities "Supporting activities that are not directly identifiable with one or more program, fundraising, or membership-development activities."). Sometimes fundraising activities include components that would otherwise be associated with program or supporting services, but in fact support fundraising. The Accounting for Costs of Activities that Include Fundraising Subsections establish financial accounting standards for accounting for costs of those joint activities and require financial statement disclosures about the nature of the activities for which [joint costs](https://asc.understandingaccounting.org/glossary/j/#joint-costs "The costs of conducting joint activities that are not identifiable with a particular component of the activity. For example, the cost of postage for a letter that includes both fundraising and program components is a joint cost. Joint costs may include the following costs: Salaries Contract labor Consultants Professional fees Paper Printing Postage Event advertising Telephones Airtime Facility rentals.") have been allocated and the amounts of joint costs. ##### [720-958-05-6](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:fc24c20acfb576b0ea909aab9eeb6add5e4176bd2a2d20bd8dc0360c9abfc4ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The functional classifications of fundraising, program, and management and general are discussed throughout the Accounting for Costs of Activities that Include Fundraising Subsections for purposes of illustrating how the guidance in these Subsections would be applied by NFPs that use those functional classifications. Some entities have a functional structure that does not include fundraising, program, or management and general, or that includes other functional classifications, such as membership development. Use of those functional classifications is not intended to require reporting the functional classifications of fundraising, program, and management and general. ### Services Received from Personnel of an Affiliate ##### [720-958-05-7](https://asc.understandingaccounting.org/asc/720/958/#720-958-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:13:01.081Z to 2026-09-10T01:13:01.081Z Record version: sha256:997858e94ba702b7127c7b9eaf4278fbd1a84ab3b1304b12365b9a55daa1af98 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Services Received from Personnel of an Affiliate Subsections provide guidance for reporting services received by a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) from personnel of an [affiliate](https://asc.understandingaccounting.org/glossary/a/#affiliate "A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity. See Control.") that directly benefit the recipient NFP and for which the affiliate does not charge the recipient NFP. Charging the recipient NFP means requiring payment from the recipient NFP at least for the approximate amount of the direct personnel costs (for example, compensation and any payroll-related fringe benefits) incurred by the affiliate in providing a service to the recipient NFP or the approximate fair value of that service.