[thebusyone]

Hi all,

Quick question. Are permanently/temporarily restricted contributions to not-for-profits considered revenue when received or when the contribution becomes unrestricted?

Thanks!

______________________
BEC - 4/4/11 - 83
REG - 1/4/12 - 82
AUD - 2/18/12 - 77
FAR - 5/31/12 ? 88
Ethics - 6/13/12 - 95

[porschify]

Uses the accrual method, so when it is pledged would be recognized as revenue. I cant think of an instance where permanently restricted assets would become unrestricted, maybe someone else can chime in with one.

REG- 81
BEC- 72,76
AUD- 67,88
FAR- 78

Done!

[misanthrope87]

Yeah it's revenue. Either Revenue – temporarily restricted or Revenue – permanently restricted.

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[jelly]

Are you talking about revenue realization and/or recognition?

Permanently restricted assets (PRA) – mostly stays in the balance sheet. Income related to this is recognized in the P&L when “released” in the form of interest income (or other category). These are really elementary JEs:

DR Cash or Endowments Receivable

CR PRA

DR Cash

CR Interest income from PRA

Temporarily restricted net assets (TRNA) – initially stays in the balance sheet. When realized (time or other contractual obligations are fulfilled), it is recognized in the P&L, usually in the “Released from Restricted Net Assets” income line. Sample JEs:

DR Cash or Grants Receivable

CR TRNA

DR TRNA

CR Released from RNA

Couldn't pass again!

[forever4]

You recognise them when receive NOT when spend!

FAR 5/14 88 PASSED!
REG 7/13 74 :((((((((....! I cant believe it!!!! I studied so hard...
REG retake 11/29 -> 89!!!!!!!!!!!!!!!!!!!
BEC 10/11/12 -> 84!!!!!!!!!!!!!
AUD 10/25/12 -> 95!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I'm DONE! OMG 8 months of hard work.

I SHALL PASS. BECAUSE IT'S ME, SO EVERYTHING WILL BE OK!

[misanthrope87]

Oh gosh. Need to go over N4P again. Doh!

@jelly

Are you sure those are balance sheet items? My becker books says cr. restricted revenue – TRNA. Kinda confused.

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[Anonymous]

The only time I can think of when Perm Restricted Assets would become Unrestricted is if the company is named a beneficiary in a Charitable Remainder Trust. In this case, the fair value of the trusts assets (or percentage the company is entitled to) would be recorded as a Perm Restricted Net Asset. When the Trust beneficiary dies and the trust's assets are distributed to the company, the assets then become unrestricted.

[jelly]

@misanthrope87: I don't have your Becker book, but as a BS or P&L line, it will be presented on the credit side of both statements.

Couldn't pass again!

[Anonymous]

I give $100 to an NFP with no indication of how I want them to spend it -> URNA, since its use has not been RESTRICTED by me the donor

DR Cash

CR URNA

DR Supplies expense

CR Cash

I give $100 to an NFP to spend on their after-school program -> TRNA, since it has been USE RESTRICTED by me the donor. I could also time restrict it by saying it can only used in the 2012 – 2013 program year. TRNA are TIME or USE restricted.

DR CASH

CR TRNA

Once the program decides to use the funds they move it to URNA

DR TRNA

CR URNA

Now they can use the funds for the after school program

DR After-school program expense

CR Cash

I'm a billionaire and I endow a $2M to a NFP. The conditions of my donation are that the corpus (body, the $2M) be held in an endowment (cash invested) and only the earnings can be used for the Children's Art Program (scenario 1) or I don't restrict the use of the earnings (scenario 2).

DR Investments

CR PRNA

DR Investments

CR Investment income

DR Investment income

CR TRNA

To reclassify the income to TRNA

The remainder of the journal entries would be based on whether the earnings were for restricted for time or use (TRNA) or unrestricted (URNA)

Just remember that Net Assets are “revenue” for non-profits. Instead of sale their is a promise to give:

DR Contribution Receivable

CR TRNA

Hope this helps and ping me if you have more questions! When I worked as an auditor I had a lot of NFP clients, which I was grateful for when taking FAR!

[PleaseDontDeleteThanks]

Sorry to post in such an old thread, but I wonder if anyone has seen this regarding promises to give in NFP's.

I have some statements prepared by a CPA that show a material uncollected unconditional promise to give (to establish a permanent endowment) in the statement of activities as a pledge contribution classified into permanently restricted.

I was under the impression that uncollected pledges are temporarily restricted until collected, then distributed to permanently restricted endowments or unrestricted depending on donor intent. ASC 958-605-45. Also, when I see the word “endowment,” I think of a corpus…not a receivable.

FAR 72, 89
BEC 80
REG 90
AUD 79

[Anonymous]

The CPA did it right. Whether it's restricted (temporarily or permanently) or unrestricted is solely based on intention of the donors, not the time of collection. And because you said it is “Unconditional” so it should be recognized as revenue when promise is given regardless when money is received.

[PleaseDontDeleteThanks]

Thanks IzChi

FAR 72, 89
BEC 80
REG 90
AUD 79

[Author]

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