On the other hand, a donor may promise to give a not- for- profit $100,000 per year over five years on the condition that the not- for- profit provides an annual report. For example, if a donor promises to give $500,000 on the condition that the organization first raises $500,000 on its own, the donor's contribution is not recognized until that first $500,000 is raised. ![]() ![]() "We talk to our clients and say anything that's material, bring it to our attention even before the planning meeting and let's talk about those key judgments our clients are making," Zygmunt said.įASB Accounting Standards Codification (ASC) Section 958- 605- 25 requires that not- for- profits wait to recognize a contribution until they are satisfied that the likelihood is remote that the conditions that accompany the contribution will not be met. Then he would suggest testing these transactions during interim fieldwork rather than waiting until the end of the year. Brian Zygmunt, CPA, a partner with Crowe Horwath LLP in Chicago who was part of an AICPA webcast on avoiding common errors in not- for- profit financial reporting, said that with clients who have a high level of activity in this area, he works to discuss these in detail during the audit planning meeting and, in particular for transactions that are individually material to the financial statements, he will request to see the related agreements right after the planning meeting. Auditors, meanwhile, can address this type of situation during planning meetings with their clients. When facing a difficult judgment call on this matter, financial statement preparers may wish to consult with their auditors ahead of time. Not- for- profits should examine intent-their own intent in soliciting the asset as well as the resource provider's intent in providing the asset-as well as several other factors to determine whether they are dealing with a contribution or exchange transaction. Not- for- profits recognize contributions upon receipt, and exchange transactions either at a point in time or over time based on facts and circumstances. CONTRIBUTIONS OR EXCHANGE TRANSACTIONS?ĭiscerning between contributions and exchange transactions can be more difficult than it appears. ![]() Nonetheless, following best practices can help not- for- profit preparers and their auditors avoid common mistakes. These judgments often drive the decision on whether to record revenue at a point in time or over time.Ĭonfusion over these challenges may be compounded by the fact that not- for- profits are implementing FASB's new revenue recognition standard as well as a new FASB standard on not- for- profit financial reporting. Furthermore, when evaluating transactions that meet the definition of a contribution, there may be a variety of other considerations including whether a contribution is conditional, an agency transaction, or a promise to give, and if it is a promise to give, whether the promise is legally enforceable. One of the primary challenges relates to assessing whether certain not- for- profit revenue transactions are actually contributions or exchange transactions. N ot- for- profits face many challenges in recognizing their revenue.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |