FASB's New Guidance for Contributions Received and Contributions Made

Laurence Scot, CPA

Over the years, there has been much confusion about whether to treat certain types of transactions as contributions or as exchanges, especially when they involve government grants. There has been further confusion when the transactions include donor-imposed dictates, called “restrictions” or “conditions.” Many people, including accountants, don't always know the difference between a restriction or condition and how to treat a transaction that has one or the other—or both—elements. The correct treatment of transactions as exchanges or contributions, and then as contributions with donor-imposed conditions or restrictions, can have a significant impact on the timing of revenue recognition, making proper treatment of these transactions imperative.