Are contributions subject to ASC 606?

Are contributions subject to ASC 606?

Contributions are to be accounted for under Subtopic 958-605, and most exchange transactions will be accounted for under the new provisions of ASC 606. Most revenue streams that nonprofits generate under exchange transactions are considered revenue from contracts with customers and will be subject to ASC 606.

What is a contribution by GAAP standards?

5. A contribution is an unconditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner.

What is a conditional contribution?

A contribution to your nonprofit is considered conditional when both of the following attributes are met: One or more barriers exist; and, The right to receive or retain payment or delivery of the promised asset depends on meeting those barriers.

When should Donor restricted contributions be recognized as revenue?

A restriction by a donor can impact the timing of revenue recognition, since it can only be revenue if the contribution is an unconditional transfer to the not-for-profit. Only after a conditional transfer becomes unconditional can it be recognized as revenue.

Are government grants considered contributions?

While contributions are most frequently provided by private funders, government grants can also be treated as contributions. Some common characteristics of contributions include: When requesting the grant, the organization states that it is seeking a contribution.

What are restricted contributions?

Restricted funds give donors assurance that their money is being used in the manner they desire. When a donor gives money to a non-profit organization, he or she may specify whether their donation is restricted or can be used in any manner the organization sees fit.

Is a conditional contribution a liability?

Conditional contributions are recognized as liabilities if assets are transferred in advance or not recognized at all until the conditions have been substantially met or explicitly waived by the donor, at which point the contributions are recognized as unconditional and classified as net assets with or without donor …

How is a contribution accounted for under ASC 958-605?

If the entity determines a transaction is a contribution, which is a transfer of cash or other assets to an entity in a voluntary, nonreciprocal transfer by another entity, then the transaction would be accounted for under ASC 958-605. Let’s break this down by looking at two examples:

Who is eligible for contributions under ASU 2018-08?

Although accounting for contributions primarily impacts not-for-profit entities, ASU 2018-08 applies to all entities (including business entities) that receive or make contributions but excludes transfers of assets from government entities to business entities.

When is a transaction accounted for under ASC 606?

If an entity determines a transaction is an exchange, which represents a reciprocal transfer in which two parties exchange something of commensurate value, then the transaction would be accounted for under other guidance (e.g. ASC 606).

Is the FASB Accounting Standards Codification an authoritative document?

The FASB Accounting Standards Codification®is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. An Accounting Standards Update is not authoritative; rather, it is a document that communicates how the Accounting Standards Codification is being amended.