302737 Flashcards
In year 4, a nongovernmental, not-for-profit school began a campaign to raise funds for a proposed capital addition. The following information is available as of June 30, year 4:
Information Amount
Received on February 1, year 4: cash contributions from
parents and alumni $450,000
Received on February 1, year 4: unconditional promises to
give, of which $300,000 was received as of June 30, year 4 600,000
Received on March 1, year 4: a promise from a year 1 alumnus
to give $50,000 if other year 1 alumni give a total of
$50,000 before September 30, year 5 50,000
Received on June 30, year 4: cash contributions from year 1
alumni in response to March 1, year 4, alumni challenge 20,000
What amount of cash contributions for this campaign should the school report in its June 30, year 4, statement of activities?
$770,000
$1,090,000
$1,050,000
$1,070,000
$1,070,000
The answer choice “1,070,000” is correct: $450,000 + $600,000 + $20,000 = $1,070,000.
Both the $450,000 in cash contributions from parents and alumni given on February 1 and $20,000 in cash contributions given by alumni on March 1 would be considered unconditional cash donations, therefore recognized in the current period. The $600,000 in unconditional promises is also recognized as a contribution as gifts, grants, bequests, etc. are reported in the period they are unconditionally promised or received, whichever is earlier. The $50,000 intention to give is not recognized because the money is contingent (or conditional) upon another individual matching the donation within the year.
$1,090,000 is incorrect. The $50,000 March 1 donation is a conditional promise to give and cannot be recognized in the current period.
$1,050,000 is incorrect. This answer choice excludes $20,000 in cash contributions received on June 30.
$770,000 is incorrect. While this answer choice correctly incorporates $600,000 in unconditional promises and $20,000 in cash contributions, the $50,000 March 1 donation is a conditional promise to give and cannot be recognized in the current period. Furthermore, the answer appears to inappropriately account for an additional $100,000 in matching contributions that have not yet been realized.
Conditional Promise to Give
The FASB ASC Glossary defines a conditional promise to give as “a promise to give that depends on the occurrence of a specified future and uncertain event to bind the promisor.”
FASB ASC 958-605-20
Unconditional
“Unconditional” is said of the promise or order on commercial paper. It is not subject to, or limited by, any modifying circumstance or prerequisite. A promise or order is conditional if the instrument states that it is “subject to” or “governed by” another agreement or is to be paid “only” out of a particular fund or source (for a nongovernmental unit).
An order or promise is not conditional although the instrument:
states its consideration.
refers to the transaction out of which it arose.
states that it is secured by a mortgage or other security device.
indicates a particular account, fund, or source from which payment may be drawn.
states that it is to be paid “only” out of a particular fund or source (for a governmental unit).
is payable only out of the entire assets of a partnership, trust, estate, or unincorporated association.
states that it is drawn under a letter of credit.
UCC 3-106
2122.07
Contribution revenues (support) from gifts, grants, bequests, etc. are reported in the period they are unconditionally promised or received, whichever is earlier. Recognition of contribution revenues is not deferred because donations are restricted. Revenues are measured at the present value (or net realizable value for any contributions expected to be received within a year after the unconditional promise was made).
2333.02
Contribution revenues (support) from gifts, grants, bequests, etc. are reported in the period they are unconditionally promised or received, whichever is earlier. Recognition of contribution revenues is not deferred because donations are restricted. Revenues are measured at the present value (or net realizable value for any contributions expected to be received within a year after the unconditional promise was made).
2333.06
Contributions must be distinguished from exchange transactions since the revenue recognition criteria are different for the two. Some items (e.g., membership dues) are exchange transactions for some organizations, contributions for others, and part exchange transaction and part contribution for still other organizations. (Membership dues are exchange transactions to the extent that the organization provides benefits or services of equal value to the members.) If the organization does not give anything in exchange for an increase in net assets, then the transaction would be accounted for as a donation.
FASB ASC 958-605-20
