FASB tackles grant and contribution accounting

Discerning between contributions and exchange transactions is a key aspect of the proposal.

Accounting guidance for contributions received and made, primarily by not-for-profits, would change under new rules proposed by FASB.

The proposed Accounting Standards Update (ASU) is designed to help organizations decide if a transaction should be accounted for as a contribution or an exchange. The proposal includes clarifying guidance to help organizations evaluate whether a resource provider is receiving value in return for the resources transferred.

FASB undertook the project after receiving feedback that characterizing grants as exchanges or contributions—and distinguishing between conditional and unconditional contributions—led to difficulty and diversity in practice among not-for-profits.

Effective dates for the proposal would be the same as those for FASB's revenue recognition standard. A public company or a not-for-profit that has issued or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an over-the-counter market would apply the standard to annual reporting periods beginning after Dec. 15, 2017, including interim periods within that period. Other organizations would apply the standard to annual reporting periods beginning after Dec. 15, 2018, and interim periods within annual periods beginning after Dec. 15, 2019.

Early adoption of the proposal would be permitted irrespective of the early adoption of the amendments in the revenue recognition standard.

Comments on the proposal can be submitted at FASB's website through Nov. 1.

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