Not-for-Profit Entities

ASC 958 is the industry Topic for not-for-profit entities (NFPs), providing only incremental guidance layered on top of the rest of the Codification. Its scope subtopic (958-10) defines which nongovernmental entities are NFPs (excluding investor-owned entities and those distributing economic benefits proportionately to owners or members) and directs NFPs to apply other Topics in an analogous manner suited to the NFP reporting model. The specialized subtopics then address distinctive NFP transactions: transfers among financially interrelated entities (958-20), where the recipient records contribution revenue and the beneficiary records an equity-method-like interest in the recipient's net assets, and equity transactions when the provider names itself or an affiliate; and split-interest agreements (958-30), where irrevocable agreements are recognized at execution at fair value with contribution revenue equal to assets received less the fair value of amounts owed to other beneficiaries. The unifying idea is that the substance of a donor-imposed arrangement — who controls the assets, whether the arrangement is revocable or conditional, and whether the parties are financially interrelated — drives whether the NFP recognizes contribution revenue, a liability or refundable advance, or an interest in another entity's net assets.

Subtopics

1. 10Overall16 ¶

   ASC 958-10 sets the scope of the Not-for-Profit Entities Topic and its relationship to the rest of the Codification. It applies to nongovernmental entities meeting the definition of an NFP and provides only incremental industry-specific guidance—NFPs must otherwise follow all other Topics unless a Scope Section exempts them or the subject matter is inapplicable (e.g., payment of dividends). It also lists the Subtopics comprising Topic 958 and directs NFPs to apply other guidance in an analogous manner suited to their reporting model.

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2. 20Financially Interrelated Entities40 ¶

   ASC 958-20 governs accounting by two NFPs that are "financially interrelated" — one entity can influence the other's operating and financial decisions AND one has an ongoing, residual economic interest in the other's net assets (958-20-15-2). When a donor transfers assets to a recipient entity (e.g., a fundraising foundation) for a financially interrelated specified beneficiary and the recipient is not a trustee, the recipient recognizes contribution revenue on receipt (958-20-25-1) and the beneficiary recognizes an interest in the recipient's net assets, adjusted for its share of changes in those net assets in a manner similar to the equity method (958-20-25-2; 35-1). Transfers in which the resource provider names itself or an affiliate as beneficiary and expects no repayment are "equity transactions" reported as a separate line in the statement of activities (958-20-25-4; 45-1).

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3. 30Split-Interest Agreements97 ¶

   ASC 958-30 governs how a not-for-profit entity accounts for split-interest agreements—trusts or similar arrangements (charitable lead/remainder annuity trusts and unitrusts, charitable gift annuities, pooled income funds) in which the NFP shares the benefits of donated assets with other, usually non-charitable, beneficiaries. Revocable agreements are treated as intentions to give (assets recorded as a refundable advance); irrevocable agreements are recognized on execution at fair value, with contribution revenue equal to the assets received less the fair value of the obligation to other beneficiaries. When a third party holds the assets, the NFP instead recognizes a beneficial interest at fair value, and the liability side of period-certain, variable-payment agreements may contain a bifurcable embedded derivative under Topic 815.

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