Clarifying the Scope and Guidance for Contributions Received and Made

Clarifying the Scope and Guidance for Contributions Received and Made

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By Amy Rybar Menefee, CPA, CFE | Business Assurance & Advisory Services Senior Manager | Not-For-Profit Industry Team

In June of this year, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2018-08, which clarifies the scope and accounting guidance for contributions received and contributions made.  Though this ASU primarily affects not-for-profit entities, the guidance in the ASU applies to all entities that receive or make contributions of cash and other assets, including promises to give, excluding transfers of assets from government entities to business entities.  The intent of the amendment is for the resource provider and the resource recipient to both apply the same guidance on each side of the transaction, so that reporting will “match.”  The amendments in ASU No. 2018-08 are effective for resource recipients for annual periods beginning after June 15, 2018 for public entities and December 15, 2018 for non-public entities.  The amendments in ASU No. 2018-08 are effective for resource providers for annual periods beginning after December 15, 2018 for public entities and December 15, 2019 for non-public entities.


Contribution vs. Exchange Transaction

The first area the guidance is meant to clarify is whether a transfer of assets is considered a contribution or an exchange transaction.  An entity determines whether a resource provider is involved in an exchange transaction by evaluating whether the resource provider is receiving proportionate value in return for the resources transferred on the basis of the following:

  • A benefit received by the public as a result of the asset transfer is not the same as value received by the resource provider.  In other words, if a resource provider receives value indirectly by providing a societal benefit, this would be considered a non-exchange transaction.
  • Execution of a resource provider’s mission does not constitute value received by the resource provider for the purposes of determining whether the transfer of assets is a contribution or exchange.

Conditional Contributions vs. Unconditional Contributions

The second area the guidance is meant to clarify is whether contributions should be considered conditional or unconditional based on whether the related agreement includes a barrier that must be overcome, and either a right of return or a right of release of an obligation to transfer assets.  If both a barrier and a right of return or release exists, this is an indication that a recipient is not entitled to the transferred assets or a future transfer of assets until the barriers have been overcome, meaning it is conditional.  Some considerations that may be indicative of barriers are:

  • The inclusion in the agreement of a measurable performance-related barrier.  These may include that the recipient is entitled to the assets after the occurrence of a specific event, for example, meeting a match.  Another example of a measurable performance-related barrier is achievement of a specific outcome.
  • The limitation in the agreement of discretion by the recipient on how to conduct an activity.  This may include requirements to follow specific guidelines or hire specific individuals to conduct the activity.
  •  Whether a stipulation is related to the purpose of the agreement.  For example, a requirement to provide a report on findings.

The following examples help to clarify:

NFP 1 receives funding from a local government to perform a research study on the benefits of healthy school lunch.  The related agreement requires NFP 1 to plan the study, perform the research, and submit a report to the local government.  The local government retains the rights to the study.  This is considered an exchange transaction because proportional value is exchanged between the parties and the resource provider retains the rights to the study.
NFP 2 receives a foundation grant to provide career training to low income individuals.  The related agreement lays out specific targets for the number of people who receive career training over the next year and includes specific minimum targets.  The agreement also provides for a right of release from the obligation. This is considered a non-exchange transaction because the foundation does not receive proportional value in return, but rather the benefit is received by the general public.  The non-exchange transaction is considered conditional because the agreement contains a right of release from the obligation and requires NFP 2 to meet specific targets for number of people trained, which is a measurable performance-related barrier.

For years there has been diversity in practice for how grants and contracts have been clarified, and the hope is, that the clarifications contained in ASU No. 2018-08 will lead to treatment and reporting that are more closely aligned.


Questions on the new changes to charitable contributions? Please reach out to your Keiter representativeEmail | Phone: 804.747.0000.

Additional Resources:

Substantiating Charitable Contributions: New Changes

Charitable Contributions: Changes with New Tax Law

Charitable Contributions: Potential Impact on Section 199A

Understanding the New Section 199A Pass-through Deduction

Tax Cuts and Jobs Act Overview


The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


About the Author

Amy is a member of Keiter’s Not-for Profit, Manufacturing, Distribution & Retail, and Mergers & Acquisitions teams. She serves clients in a variety of industries including: not-for-profit, manufacturing, distribution and retail, insurance, and waste management. Amy has extensive knowledge in areas of finance including financial review and analysis, the audit process, financial reporting, and Sarbanes-Oxley set-up and testing.  Read more of Amy’s insights on our blog.

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