Consider FASB's 2018 guidelines for accounting for contributions and answer the following: a. Identify the characteristics...

Consider FASB's 2018 guidelines for accounting for contributions and answer the following:

a. Identify the characteristics of exchange transactions and describe when revenue should be recognized.

b. Identify the characteristics of donor-imposed conditions and describe when revenue should be recognized.

c. Identify the characteristics of donor-imposed restrictions and describe when revenue should be recognized.

Expert Solution

a) Trading practices on the organized exchanges and the regulatory arrangements covering the exchanges, are markedly different from those in the OTC market. In the exchange, trading takes place publicly in a centralized location and products are standardized. There are margin payments, daily marking to market, and a cash settlement through a central clearinghouse.

Revenue is recognized when it is probable that future economic benefits or service potential will flow to the entity and these benefits can be measured reliably.

b) donor-imposed conditions represent uncertain future events in terms of which the donor has the right of repayment of the funds, or in terms of which the donor will make no further funds available (FASB 1993a – SFAS 116:par. 7).

recognition of a contribution as revenue if the contribution is conditional on events beyond the control of either the resource provider or recipient.

c) The existence of restrictions is determined by "donor-imposed" restrictions, internal restrictions (such as Board designated funds) are considered unrestricted. Permanently restricted support includes all contributions, which are not expendable by the NFP. The most prevalent example of this is an endowment fund..

A restriction by a donor can impact the timing of revenue recognition, since it can only be revenue if the contribution is an unconditional transfer to the not-for-profit. Only after a conditional transfer becomes unconditional can it be recognized as revenue.

ekkarill92 answered 1 year ago

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