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GAAP For Non-Profits › Specific Financial Statement Items

Revenue Recognition Principles For Contributions


Contributions should be valued at their fair value at the time of contribution so long as fair value can be reasonably estimated. (4410.19)

Unrestricted Contributions

The accounting for unrestricted contributions is simple. Unrestricted contributions are recognized as revenue of the operating or general fund when received or receivable. (4410..47,68)

Restricted Contributions

An organization must disclose its policy for the recognition of any restricted contributions. (4410.21) A sample of this note disclosure is found in SpringTime’s financial statements.

An organization may set up restricted funds if it so desires (4410.10) Where a restricted fund has been established for certain contributions, these are recognized as revenue of the fund in the period received or receivable. (4410.62) If no restricted fund exists for a certain contribution, the organization may choose to create one. Such a change would be considered a change in accounting policy and would require the restatement of prior period results and the retroactive restatement of the financial statements.

Where the organization chooses not to establish a restricted fund, the contribution would be deferred as a liability on the balance sheet and brought into income as the related expenses are incurred. (4410.65) This accounting attempts to match the revenue with the associated expense, the purpose for which the funding was made.

Some contributions do not have associated expenses, for example donations of land or endowments: land is not amortized and endowments by their nature are not to be spent. In cases such as these, where there is no appropriate restricted fund for the contribution or no expense associated with the contribution, the organization would record the contribution as a direct increase of net assets, crediting net assets on the balance sheet with no entry in the statement of operations. The receipt of the contribution would be shown in the statement of changes in net assets.