Overview

This Section establishes standards for the recognition, measurement, presentation and disclosure of contributions, and related investment income, received by not-for-profit organizations.

Organizations may choose one of the following two methods to account for contributions received: a) the deferral method or b) the restricted fund method. Each of these methods is described briefly below:

Deferral method:

The deferral method is a method of accounting for restricted contributions under which restricted contributions related to expenses of future periods are deferred and recognized as revenue in the period in which the related expenses are incurred. Endowment contributions are reported as direct increases in net assets (i.e. they are not recognized as revenue as they must be maintained permanently). All other contributions are reported as revenue in the period in which they are received or are considered receivable.

Restricted fund method:

The restricted fund method is a specialized used of fund accounting in which the restricted contributions are recognized as revenue in one or more restricted funds and endowments are recognized as revenue in an endowment fund. Unrestricted contributions are accounted for as revenue in the general fund or in another unrestricted fund in the year received or receivable. All restricted funds are recognized immediately. There are no deferred contributions in restricted funds. However, if a restricted contribution is not recognized in a restricted fund, it must be accounted for in the general fund using the deferral method.

Once the organization has chosen a method to account for its contributions, it must apply that method consistently to all contributions received. A change in the method of accounting for contributions is treated as a change in accounting policy in accordance with Section 1506 Accounting changes Part II of the Handbook.

Contributions of materials and services:

An organization is not obligated to recognize contributions of materials or services. If it chooses to recognize these, it should do so only when a fair value can be reasonably estimated and the materials and services are used in the normal course of the organization's operations and would otherwise have been purchased.

History of Section 4410

Note: The above summary does not include details of consequential amendments made as the result of other projects.

Not-for-Profit Advisory Committee meetings

• September 10, 2018 - Chart summarizing the types of contributions and their characteristics
• February 22, 2017 - Using consistent concepts to recognize revenue and possible options to account for donor stipulated contributions
• November 17, 2016 - Contributions – Revenue Recognition and Related Matters
• January 6, 2016 – Contributions: Revenue Recognition and Related Matters

Amendments under consideration

• Contributions – Revenue Recognition and Related Matters (Possible Amendments to Sections 4400, 4410 and 4420)