Revenue Recognition of Grants and Contracts by Not-for-Profit Entities

On June 21, 2018, the Financial Accounting Standards Board (FASB) issued a new standard intended to clarify and improve the scope and the accounting guidance for contributions of cash and other assets received and made by not-for-profit organizations and business enterprises. The new guidance is expected to be particularly helpful in the accounting for grants and similar contracts awarded by government agencies and others to not-for-profit organizations. FASB proposed the changes after receiving feedback that not-for-profit organizations experience difficulty in characterizing grants as exchange transactions or contributions and in determining whether a contribution is conditional. These challenges, which result in diversity in practice, have been longstanding; however, FASB’s new revenue recognition standard placed renewed focus on the issues because it eliminates certain limited exchange transaction guidance and has new disclosure requirements. The new standard provides a more robust framework for determining whether a transaction should be accounted for as an exchange transaction or as a contribution, for determining whether a contribution is conditional or unconditional, and for distinguishing a donor-imposed condition from a donor-imposed restriction.

Our discussion leader is David Odahl, CPA, a senior manager at Wegner CPAs. David has over 20 years of experience working with not-for-profit organizations on a variety of financial statement and tax engagements. He currently oversees the firm’s quality control function, ensuring that the firm and its personnel are complying with applicable professional standards.


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Revenue Recognition of Grants and Contracts – Slides

Examples from FASB ASU 2018-08