[Frances]

I have encountered problems where there either is or is not an accounting policy implying a “time restriction on gifts of long-lived assets,” but I have not been able to determine from any of the answers what this means. What does a time restriction do? How would the accounting be different than a policy of no time restriction?

Thank you in advance for any help!

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

Waiting for NASBA to process my application.

[j3cpa]

Can you give an example of one of your problem?

I did it. You can too!

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Frances]

Alpha Hospital, a large not-for-profit entity, has adopted an accounting policy that does not imply a time restriction on gifts of long-lived assets. A benefactor provided funds for building expansion in an earlier period. The funds are used to purchase a building in the current fiscal period. Indicate the manner in which this transaction affects Alpha's current financial statements.

A. (Correct)
Increase in unrestricted revenues, gains, and other support

B.
Decrease in an expense

C.
Increase in net assets with donor restrictions

D.
Decrease in net assets without donor restrictions

I got this problem right, but I don't understand the time restriction concept, so I think I am missing some of the complexity that was intended. Thank you for your help!

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

Waiting for NASBA to process my application.

[j3cpa]

When a donor donate an asset of any kind to a non profit, they can choose how/when/what that fund will be used. If they don’t, the board can decide how the funds or asset should be used and place a restriction on it.

In this case, they chose that there’s no restriction so we simply increase un restricted revenue.

I think you’re over thinking it. Review restrictions topics and you’ll be fine.

Best luck.

I did it. You can too!

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[Frances]

I found a question that has both options in the solution! In both situations, the donor did not place any restrictions on the contribution.

If the NfP doesn't have a policy implying a time restriction on gifts of long-lived assets, the assets are recorded without donor restrictions.

If the NfP does have a policy implying a time restriction on gifts of long-lived assets, the assets are recorded with donor restrictions even if the actual donor did not place any restrictions. The restricted status is released over time (possibly through depreciation?).

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

Waiting for NASBA to process my application.

[Globetrotter]

I thought that only Donor can stipulate restrictions of any kind.
If the “restrictions” are imposed by NFP, the asset is unrestricted regardless of how the entity is treating it.

AUD - 94
BEC - 87
FAR - 87
REG - 87

BEC - 87 (03/2019)

AUD - 94 (11/2018)

REG - 87 (06/2019)

FAR - 87 (08/2018)

[Anonymous]

This is the one part that does indeed confuse most. As someone noted above, donors typically are the only ones who can impose restrictions except if the board as adopted a policy to time restrict long-lived assets upon donation. The concept is simple. You get donated a building worth $100,000. You have already adopted the policy to treat this as time restricted. You chose a 10 year life of the asset and use straight-line. For 10 years, you would release $10,000 (100,000 / 10 years) and by the end, the building will be fully depreciated, as well as fully unrestricted 😉

I think this caused so much confusion that the new not-for-profit standards coming out (ASU 2016-14) are no longer allowing time restrictions on fixed assets. All fixed assets will be recorded as unrestricted (without restrictions) income if donated and depreciated accordingly.

[Author]

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