Question

Provide life examples of temporarily restricted net assets.

Answer 1

Temporarily Restricted Assets

These are assets owned by the Non Profit Organisations or Charitable Organisations with a specific condition/restrictions from the donor of assets. Generally conditions requires the asset to be used for specific purposes or some time restraints, after which assets can be unrestrictly used after such time lapse.

Examples

1. A Non profit organisation may have various ongoing projects such as Hospital, School etc. while some people donate to unrestricted funds which can be used for any purpose as the organisation deems fit, but some donate the amount specifically for a project such as donation for School Building Fund. Now such part shall only be used for development/construction of School Building as Donor has applied the conditions for such amount.
2. Some people donate a land or building to such organisation with a specific condition that such building/land shall not be sold and to be used for specific purposes such as to be modified as Hospital or School or religious building etc. for specified period such as 15 years. Hence these are known as Temporarily restricted Assets.