As many Organizations have been focusing over the last year on implementation of the new revenue recognition standards in relation to contributions received, it is time for a reminder that ASU 2018-08 Not-for-Profit Entities (Topic 958), Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, also includes provisions for contributions made by a provider. The portion related to contributions made is effective for most entities for year ends beginning after December 15, 2019.
We highly recommend that you review the resources provided above as you determine the applicability of the ASU from a provider perspective. The criteria for determining whether fund transfers are contribution or exchanges and/or conditional or unconditional are the same for both providers and recipients. Certainly, the idea is provider and recipient organizations would come to the same conclusion regarding the assessment of the criteria and recognition of revenue and expenses; however, there is no such requirement to do so or to verify as such between the organizations.
From a provider perspective, the recognition of the expense is similar in nature to the revenue recognition for the recipient. The same recognition model is used when determining recognition of the expense. Therefore, pursuant to Subtopic 720, an unconditional contribution made by a provider would be recognized as an expense in the period made. Conditional contributions would be prepaid (deferred by the recipient) until the conditions are substantially met or satisfied. As with revenue recognition, a contribution expense should not be recognized based on an expectation that the recipient is likely to satisfy the condition.
For any questions or guidance related to Topic 958, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, please contact Stephanie Allgeyer today at firstname.lastname@example.org or 800.887.0437.