This document summarizes accounting standards for different types of contributions. It discusses when contributions should be recorded, the impact of donor restrictions, accounting for contributed services and non-cash contributions, and pass-through contributions. The key points are that contributions must be unconditional transfers, donor restrictions can be temporary or permanent, contributed services may be recorded if they create value or require specialized skills, non-cash contributions are recorded at fair market value, and pass-through contributions depend on the level of control the recipient organization has.

1. Accounting for Contributions
When contributions should be
recorded
Understanding the impact of donor
restrictions on the reporting of
contributions
Accounting for contributed services
Accounting for noncash contributions
Pass-through contributions

2. When Contributions Should Be
Recorded
• SFAS 116, Accounting for Contributions Made
and Contributions Received
• Definition
“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 . Other
assets include securities, land, buildings, use of facilities
or utilities, materials and supplies, intangible assets,
services , and unconditional promises to give those
items in the future.”

3. Unconditional Promise to Give
• Definition: ” A written or oral agreement to
contribute cash or other assets to another entity;
however, to be recognized in the financial
statements there must be sufficient evidence in
the form of verifiable documentation that a
promise was made and received. A
communication that does not indicate clearly
whether it is a promise is considered an
unconditional promise to give if it indicates an
unconditional intention to give that is legally
enforceable.”

4. Donor Restrictions
• Temporary
Donor imposed restriction that permits a not-for-
profit organization to use or spend donated
assets as specified. Temporary restrictions are
satisfied either by the passage of time or by the
actions of the organization.
• Permanent
Donor stipulates that resources be maintained
permanently, but permits the organization to use
or spend part or all of the income derived from
the donated assets.

5. Accounting for Contributed
Services
• Record as Contribution Revenue with a
corresponding increase in fixed assets( i.e.
property, plant and equipment) or in an expense
if services received meet one of the following
criteria:
1. Create or enhance the value of a nonfinancial
asset
2. require specialized skills , are provided by
individuals possessing those skills, and would
typically be purchased if not provided by
donation.

6. Accounting for Noncash
Contributions
• Examples-services, noncash assets,
forgiveness of liabilities
• More common noncash contribution is
investment securities. Others are real
estate, inventory, art collections, etc.
• Record at fair Market Value

7. Pass-Through Contributions
• Organization basically serves as agent, trustee or
intermediary
• Question is : Should revenue and corresponding
expense be recorded as the funds raised are passed
through to the other organization?
• SFAS No. 136: Generally, recipient organization records
an asset and a liability for cash and financial assets
received measured by their FMV.
• If the recipient organization has variance power or the
recipient organization and the ultimate beneficiary are
financially interrelated ( as described by SFAS 136), then
recipient organization can record contribution and
expense.