August 1999

Gives Guidance on Not-for-Profit Issues

The Financial Accounting Standards Board recently issued new accounting guidance for transfers of assets to a not-for-profit organization that raises or holds contributions for other organizations.

Statement 136, Transfer of Assets to a Not-for-Profit Organization or Charitable Trust That Raises or Holds Contributions for Others, requires a recipient organization to recognize an asset and a liability, rather than contribution revenue, if it accepts cash or other financial assets from a donor and agrees to disburse them, or the return from investing them, or both to the specified beneficiary. The specified beneficiary reports its interest in the assets held by the recipient organization as asset and contribution revenue.

"This standard answers questions about which not-for-profit organization reports a contribution if the donor specifies that another entity is ultimately to receive the benefits of the gift," said Sue Budak, a consultant to the FASB staff and manager of the project. "It also answers questions about whether the specified beneficiary is to report an asset for its interest in the transferred gift. Although the standard is of special interest to federated fundraising organizations, community foundations, institutionally-related foundations, and similar organizations that raise or hold contributions for others, it has the potential to affect any not-for-profit organization because that not-for-profit organization could be specified as the beneficiary in the transaction."

The statement also addresses situations in which the recipient organization and the specified beneficiary meet criteria defining them as financially interrelated organizations. A not-for-profit organization and its related foundation generally will meet such criteria. Additionally, the statement provides guidance for circumstances in which a transfer takes place in a manner similar to that described above but is not a contribution because the transfer is revocable or reciprocal.