net assets with donor restrictions

ASC 958-205 governs the presentation of a not-for-profit entity's general-purpose financial statements. A complete set consists of a statement of financial position, a statement of activities, a statement of cash flows, and notes (958-205-45-4), with net assets classified in two minimum classes—net assets with donor restrictions and net assets without donor restrictions (958-205-45-2(b)). It also prescribes when donor restrictions expire, how endowment funds (including those under UPMIFA) are classified, and the required endowment and underwater endowment disclosures.

This subtopic governs the not-for-profit statement of financial position (the NFP equivalent of a balance sheet). At a minimum the statement must report totals for assets, liabilities, net assets, net assets with donor restrictions, and net assets without donor restrictions, focusing on the entity as a whole (958-210-45-1). It also requires liquidity-related presentation and disclosure, including qualitative information about how the NFP manages liquid resources and quantitative information about financial assets available for general expenditures within one year (958-210-50-1A).

ASC 220-958 governs the not-for-profit statement of activities — the NFP substitute for a business entity's income statement. It requires the statement to focus on the entity as a whole and report the change in total net assets, the change in net assets with donor restrictions, and the change in net assets without donor restrictions, with revenues, expenses, gains, losses, and reclassifications classified among those net asset classes. It addresses how to report these elements (including gross versus net display, investment return net of investment expenses, and optional intermediate measures of operations), but not when to recognize or how to measure them.

This subtopic governs contributions (promises to give) receivable — a receivable unique to not-for-profit entities — focusing on subsequent measurement, presentation, and disclosure after initial recognition under 958-605. Unconditional promises are recognized as an asset and revenue when received (with verifiable documentation), measured initially under 958-605-30-4 through 30-8, and thereafter either at fair value under the 825-10 fair value option or under the change-in-value rules in Section 35 (interest accretion is contribution revenue; decreases in expected assets are bad debt expense/loss; increases generally are not recognized except as recovery of previously recognized bad debts).

This subtopic governs long-lived tangible assets held by not-for-profit entities, including contributed property, plant, and equipment and collection items. Its core rules are that all NFPs must recognize depreciation on long-lived tangible assets (360-958-35-1), that contributed PP&E is recognized under the Contributions Received Subsections of 958-605 with initial measurement including all costs to place the asset in use (360-958-30-1), and that an NFP holding a "collection" may elect one of three policies—full capitalization, prospective capitalization, or no capitalization—but capitalizing selected items is precluded (360-958-25-3).

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.

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).

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.