The US Financial Accounting Standards Board (FASB) has issued proposed Accounting Standard Update (ASU), Not-for-profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. Although the proposed guidance would apply primarily to not-for-profit entities, it would also apply to business enterprises and all other organisations that receive or make contributions of cash and other assets. The comment deadline is 1 November 2017.
The proposed ASU helps organisations decide whether they should account for transactions as contributions (non-reciprocal transactions) within the scope of contribution guidance; or as exchanges (reciprocal transactions), subject to FASB Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, or other applicable guidance. To assist organisations in making that determination, the proposed ASU includes guidance for assessing whether a resource provider is receiving value in return for the resources transferred.
The proposed guidance also provides an improved framework for determining whether a contribution is conditional or unconditional, and to help distinguish a donor-imposed condition from a donor-imposed restriction.
The proposed amendments would not apply to transfers of assets from the government to businesses.
The effective dates for the proposed standard, if adopted, would be the same as for Topic 606, as follows:
- Public companies or not-for-profit organisations that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market would apply the new standard to annual reporting periods beginning after 15 December 2017, including interim periods within that annual period
- Other organisations would apply the standard to annual reporting periods beginning after 15 December 2018, and interim periods within annual periods beginning after 15 December 2019.
Entities would be permitted to adopt the new guidance early, irrespective of the early adoption of the amendments in Topic 606.
The proposed ASU is available on this link.
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