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Except as provided in paragraphs

958-605-25-16 through 25-19

(related to contributed services, works of art, historical treasures, and similar items), contributions received shall be recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received. The classification of contributions received as revenues or gains depends on whether the transactions are part of the NFP's ongoing major or central activities (revenues), or are peripheral or incidental to the NFP (gains). A contribution made and a corresponding contribution received generally are recognized by both the donor and the donee at the same time, that is, when made or received, respectively, or if conditional, when the barrier is overcome. The definition of a contribution encompasses both a transfer of cash or other assets to an entity and a reduction, settlement, or cancellation of its liabilities.

After a contribution has been deemed not to contain a donor-imposed condition (see paragraphs

958-605-25-5A through 25-5F

), an entity shall consider whether the contribution includes a donor-imposed restriction, which includes the consideration about how broad or narrow the purpose of the agreement is and whether the resources can be used only after a specified date.

Donor-imposed restrictions place limits on the use of contributed resources and may affect an entity's performance and its ability to provide services. However, limitations on the use of donated resources do not change the fundamental nature of the contribution transaction or conclusions about when to recognize the underlying event.

A major uncertainty about the existence of value may indicate that an item received or given should not be recognized. For example, a gift of clothing or furniture has no value unless it can be utilized in either of the following ways:

1. a
   Used internally by the not-for-profit entity (NFP) or for program purposes
2. b
   Sold by the NFP.

If an item is accepted solely to be saved for its potential future use in scientific or educational research and has no alternative use, it may have uncertain value, or perhaps no value, and shall not be recognized. For example, contributions of flora, fauna, photographs, and objects that are identified with historic persons, places, or events often have no value or have highly restricted alternative uses.

However, contributed tangible property worth accepting generally possesses the common characteristic of all assets—future economic benefit or service potential. The future economic benefit or service potential of a tangible item usually can be obtained by exchanging it for cash or by using it to produce goods or services. Certain forms of contributed resources may be more difficult to measure reliably than others, but the form of the contributed resources alone should not change conclusions about whether to recognize the underlying event.

A donor-imposed condition must have both:

1. a
   One or more barriers that must be overcome before a recipient is entitled to the assets transferred or promised
2. b
   A right of return to the contributor for assets transferred (or for a reduction, settlement, or cancellation of liabilities) or a right of release of the promisor from its obligation to transfer assets (or reduce, settle, or cancel liabilities).

For a donor-imposed condition to exist, it must be determinable from the agreement (or another document referenced in the agreement) that a recipient is only entitled to the transferred assets or a future transfer of assets if it has overcome the barrier. An agreement does not need to include the specific phrase right of return or release from obligation; however, an agreement should be sufficiently clear to be able to support a reasonable conclusion about when a recipient would be entitled to the transfer of assets. In the absence of any apparent indication that a recipient is only entitled to the transferred assets or a future transfer of assets if it has overcome a barrier, the agreement shall not be considered to contain a right of return of assets transferred or a right of release from obligation and shall be deemed a contribution without donor-imposed conditions.

An entity must evaluate the facts and circumstances of an agreement to determine whether a stipulation represents a barrier that must be overcome before the recipient is entitled to the assets transferred or promised. A barrier often places specific requirements on an organization about the use of the transferred assets to be entitled to those assets. A probability assessment about whether the recipient is likely to meet the stipulation is not a factor when determining whether an agreement contains a barrier. In cases of ambiguous donor stipulations, see paragraph 958-605-25-5E.

The following table contains a list of indicators that may be helpful in determining whether an agreement contains a barrier. Depending on the facts and circumstances, some indicators may be more significant than others, and no single indicator shall be determinative. See paragraphs

958-605-55-17A through 55-17F

and

958-605-55-70A through 55-70T

for implementation guidance and illustrative examples on determining whether a contribution is conditional.

Indicates a Barrier
Measurable Performance-Related Barrier or Other Measurable Barrier	The agreement includes a measurable performance-related barrier or other measurable barrier. Measurable performance-related barriers or other measurable barriers often are coupled with a time limitation (for example, indicating that the outcomes are to be achieved within a specified time frame). Examples of measurable performance-related barriers include a requirement that indicates that a recipient's entitlement to transferred assets is contingent upon the achievement of any of the following: a A specified level of service b An identified number of units of output c A specific outcome. Other measurable barriers stipulate that a recipient is entitled to the resources if an identified event occurs (for example, a matching requirement).
Limited Discretion by the Recipient on the Conduct of an Activity	The recipient has limited discretion over the manner in which an activity can be conducted. Limited discretion of the recipient is more specific than a donor-imposed restriction. Restrictions limit the use of a contribution to a specific activity or time but do not necessarily place limitations on how the activity is performed. Examples of limited discretion could include a requirement to follow specific guidelines about incurring qualifying expenses, a requirement to hire specific individuals as part of the workforce conducting the activity (such as the hiring of specified employees or an identified professor at a university), and a specific protocol that must be adhered to.
Stipulations That Are Related to the Purpose of the Agreement	The stipulations are related to the purpose of the agreement. Examples could include a requirement for (a) a homeless shelter to provide a specified number of meals to the homeless (also an example of a measurable performance-related barrier), (b) an animal shelter to expand its facility to accommodate a specified number of additional animals, and (c) a research report that summarizes the findings from a grant on gluten-related allergies. A stipulation that is unrelated to the purpose of the agreement (for example, administrative and trivial stipulations) is not indicative of a barrier. Administrative and trivial stipulations could include routine reporting such as a requirement to provide (a) an annual report or (b) a report that summarizes the recipient's performance to demonstrate the underlying actions that were taken to meet the barrier(s) specified in the agreement. For example, a report that indicates the number of meals that a homeless shelter provided to the homeless is typically not a stipulation that would contribute to achieving the purpose of the agreement. Rather, the action of providing a specified number of meals to the homeless would meet the stipulation that is required by a recipient to achieve the purpose of the agreement.

Determining whether a contribution is conditional can be difficult if it contains donor stipulations that do not clearly state whether both:

1. a
   One or more barriers exist
2. b
   The right to receive or retain payment or delivery of the promised assets depends on meeting those barriers.

In cases of ambiguous donor stipulations, a contribution containing stipulations that are not clearly unconditional shall be presumed to be a conditional contribution.

A transfer of assets that is a conditional contribution shall be accounted for as a refundable advance until the conditions have been substantially met or explicitly waived by the donor.

This Subsection provides additional guidance for the following types of contributed assets:

1. a
   Promises to give
2. b
   Contributed services
3. c
   Works of art, historical treasures, and similar items
4. d
   Items given for use in fundraising.

The recognition guidance in the Contributions Received Subsections depends on whether the promise to give is unconditional or conditional as follows.

Pursuant to paragraph 958-605-25-2, an unconditional promise to give shall be recognized when it is received. However, to be recognized there must be sufficient evidence in the form of verifiable documentation that a promise was made and received.

A communication that does not indicate clearly whether it is a promise is considered an unconditional promise to give if it indicates an unconditional intention to give that is legally enforceable. Legal enforceability refers to the availability of legal remedies, not the intent to use them.

Solicitations for donations that clearly include wording such as information to be used for budget purposes only or that clearly and explicitly allow resource providers to rescind their indications that they will give are intentions to give rather than promises to give and shall not be reported as contributions.

Conditional promises to give, which contain donor-imposed conditions that represent a barrier that must be overcome as well as a right of release from obligation, shall be recognized when the condition or conditions on which they depend are substantially met, that is, when a conditional promise becomes unconditional. Imposing a condition creates a barrier that must be overcome before the recipient is entitled to the assets promised. For example, a promise to contribute cash if a like amount of new gifts is raised from others within 30 days and a provision that the cash will not be transferred if the gifts are not raised impose a condition on which entitlement to a promised gift depends.

Paragraph superseded by Accounting Standards Update No. 2018-08.

A transfer of assets after a conditional promise to give is made and before the conditions are met is the same as a transfer of assets that is a conditional contribution (see paragraph 958-605-25-5F). A change in the original conditions of the agreement between promisor and promisee shall not be implied without an explicit waiver (see paragraph 958-605-35-2).

Paragraph superseded by Accounting Standards Update No. 2018-08.

Absence of a specified time for transfer of cash or other assets, by itself, does not necessarily lead to a determination that a promise to give is ambiguous. If the parties fail to express the time or place of performance and performance is unconditional, performance within a reasonable time after making a promise is an appropriate expectation; similarly, if a promise is conditional, performance within a reasonable time after fulfilling the condition is an appropriate expectation. Promises to give that are silent about payment terms but otherwise are clearly unconditional shall be accounted for as unconditional promises to give.

Contributions of services shall be recognized if the services received meet any of the following criteria:

1. a
   They create or enhance nonfinancial assets.
2. b
   They require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Services requiring specialized skills are provided by accountants, architects, carpenters, doctors, electricians, lawyers, nurses, plumbers, teachers, and other professionals and craftsmen.

Contributed services and promises to give services that do not meet these criteria shall not be recognized. See Examples 7 through 11 (paragraph ) for illustrations of this guidance.

For services received from personnel of an affiliate that directly benefit the recipient NFP and for which the affiliate does not charge the recipient NFP, the guidance in Subtopic 958-720 shall be followed. 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.

Contributions of works of art, historical treasures, and similar items that are not part of a collection shall be recognized as assets and as revenue or gains in financial statements pursuant to paragraph 958-360-25-2.

An entity need not recognize contributions of works of art, historical treasures, and similar assets if the donated items are added to collections that meet all three of the criteria in the definition of a collection. Contributed collection items shall be recognized as revenues or gains if collections are capitalized and shall not be recognized as revenues or gains if collections are not capitalized. An entity that does not recognize and capitalize its collections or that capitalizes collections prospectively shall disclose the additional information required by paragraphs 958-360-45-3 and 958-360-45-5.

NFPs may also receive items, such as tickets, gift certificates, works of art, and merchandise, that are to be used for fundraising purposes by transferring them to other resource providers (the ultimate resource provider or recipient) during fundraising events. Those gifts in kind can be linked to asset transfers from the original resource providers to the ultimate resource providers (recipients) because they are, in substance, part of the same transaction; those gifts in kind shall be reported as contributions and measured at fair value when originally received by an NFP. The difference between the amount received for those items from the ultimate resource providers (recipients) and the fair value of the gifts in kind when originally contributed to the NFP shall be recognized as adjustments to the original contributions when the items are transferred to the ultimate resource providers (recipients).

This Subsection provides recognition guidance for the following types of recipients of donated assets:

1. a
   Intermediaries
2. b
   Agents
3. c
   Specified beneficiaries.

It also provides guidance for transfers to a recipient entity that are not recognized as contributions because of any of the following conditions:

1. a
   The transfer is revocable.
2. b
   The transfer is repayable.
3. c
   The transfer is reciprocal.

If an intermediary receives cash or other financial assets, it shall recognize its liability to the specified beneficiary concurrent with its recognition of the assets received from the donor. If an intermediary receives nonfinancial assets, it is permitted, but not required, to recognize its liability and those assets provided that the intermediary reports consistently from period to period and discloses its accounting policy. While not required, a not-for-profit entity (NFP) may choose to present its individual assets and liabilities by net asset class, in which case those assets and liabilities attributable to the agency transaction would be reported in the net assets without donor restrictionsclass.

Except as described in paragraphs 958-605-25-25 and 958-605-25-27, a recipient entity that accepts assets from a donor and agrees to use those assets on behalf of or transfer those assets, the return on investment of those assets, or both to a specified beneficiary is not a donee. It shall recognize its liability to the specified beneficiary concurrent with its recognition of cash or other financial assets received from the donor. Except as described in those paragraphs, a recipient entity that receives nonfinancial assets is permitted, but not required, to recognize its liability and those assets provided that the recipient entity reports consistently from period to period and discloses its accounting policy. Similar to the guidance in paragraph 958-605-25-23, those assets and liabilities would be reported in the net assets without donor restrictions class.

A recipient entity that is directed by a donor to distribute the transferred assets, the return on investment of those assets, or both to a specified unaffiliated beneficiary acts as a donee, rather than an agent, trustee, or intermediary, if the donor explicitly grants the recipient entity variance power—that is, the unilateral power to redirect the use of the transferred assets to another beneficiary.

Although variance power has the appearance of being conditional, the asserted condition is not effective for the following reasons:

1. a
   The condition can be substantially met solely by a declaration of the governing board of the recipient entity that states that a distribution to a specified beneficiary is unnecessary, incapable of fulfillment, or inconsistent with the charitable needs of the community or not-for-profit entities (NFPs) being served.
2. b
   The variance power is unilateral—exercise of the power does not require approval from the donor, beneficiary, or any other interested party.

A recipient entity that is explicitly granted variance power has the ability to use assets it receives to further its own purpose from the date it accepts the assets. In that situation, the recipient entity shall account for receipt of funds by recognizing an asset and corresponding contribution revenue unless the transfer is revocable, repayable, or reciprocal as described in paragraph 958-605-25-33. Example 10 (see paragraphs ) illustrates a reciprocal transaction in which the NFP transfers assets to a recipient entity and names itself as the specified beneficiary.

If a recipient entity and a specified beneficiary are financially interrelated entities and the recipient entity is not a trustee, the recipient entity shall recognize a contribution received when it receives assets (financial or nonfinancial) from the donor that are specified for the beneficiary.

A specified beneficiary shall recognize its rights to the assets (financial or nonfinancial) held by a recipient entity as an asset unless the recipient entity is explicitly granted variance power (see paragraph 958-605-25-25). Those rights are any one of the following:

1. a
   An interest in the net assets of the recipient entity (see paragraph 958-605-25-32)
2. b
   A beneficial interest
3. c
   A receivable.

If the beneficiary has an unconditional right to receive all or a portion of the specified cash flows from a charitable trust or other identifiable pool of assets, the beneficiary shall recognize that beneficial interest.

If the beneficiary's rights are neither an interest in the net assets of the recipient entity (see paragraph 958-605-25-32) nor a beneficial interest (see the preceding paragraph), a beneficiary shall recognize its rights to the assets held by a recipient entity as a receivable and contribution revenue in accordance with paragraphs

958-605-25-8 through 25-10

and 958-605-45-5 for unconditional promises to give.

If the donor explicitly grants a recipient entity variance power, the specified unaffiliated beneficiary shall not recognize its potential for future distributions from the assets held by the recipient entity. Those future distributions, if they occur, shall be recognized as contributions by the specified beneficiary when received or unconditionally promised.

Pursuant to paragraph 958-20-25-2, if the beneficiary and the recipient entity are financially interrelated entities, the beneficiary shall recognize its interest in the net assets of the recipient entity. See Subtopic 958-20 for additional information about transactions involving financially interrelated entities.

A transfer of assets to a recipient entity is not a contribution and shall be accounted for as an asset by the resource provider and as a liability by the recipient entity if any of the following conditions are present:

1. a
   The transfer is subject to the resource provider's unilateral right to redirect the use of the assets to another beneficiary.
2. b
   The transfer is accompanied by the resource provider's conditional promise to give or is otherwise revocable or repayable.
3. c
   The resource provider controls the recipient entity and specifies an unaffiliated beneficiary. See the definition of control in Subtopic 958-810.
4. d
   The resource provider specifies itself or its affiliate as the beneficiary and the transfer is not an equity transaction (see paragraph 958-20-25-4).