Introduction to FASB 116
The Financial Accounting Standards Board (FASB) issued Statement No. 116, Accounting for Contributions Received and Contributions Made, to provide guidance on the accounting and reporting of contributions made and received by not-for-profit organizations.
This standard aims to improve the consistency and comparability of financial reporting among non-profit organizations, ensuring that contributions are properly recognized and disclosed in accordance with Generally Accepted Accounting Principles (GAAP).
Scope and Applicability of FASB 116
FASB 116 applies to all non-profit organizations, including charities, foundations, and other types of not-for-profit entities, that receive or make contributions, such as cash, goods, or services.
The standard provides specific guidance on the accounting and reporting requirements for different types of contributions, including conditional and restricted contributions, as well as contributions of long-lived assets.
Recognition and Measurement of Contributions
Under FASB 116, contributions received by a non-profit organization are recognized as revenue in the period of receipt, unless the contribution is conditional or restricted, in which case it is recognized when the condition is met or the restriction is lifted.
The standard also provides guidance on the measurement of contributions, including the use of fair value to measure the value of non-cash contributions, such as goods or services.
Disclosure Requirements under FASB 116
FASB 116 requires non-profit organizations to disclose certain information about contributions received and made, including the types and amounts of contributions, as well as any restrictions or conditions on the contributions.
The standard also requires disclosure of the accounting policies used to recognize and measure contributions, as well as any significant transactions or events related to contributions.
Implementation and Compliance with FASB 116
Non-profit organizations must comply with the requirements of FASB 116 in their financial reporting, including the recognition, measurement, and disclosure of contributions received and made.
To ensure compliance, organizations should review their accounting policies and procedures to ensure that they are in accordance with the standard, and consider seeking the advice of a qualified accounting professional if necessary.
Frequently Asked Questions
What is the purpose of FASB 116?
The purpose of FASB 116 is to provide guidance on the accounting and reporting of contributions made and received by non-profit organizations.
Which organizations are subject to FASB 116?
FASB 116 applies to all non-profit organizations, including charities, foundations, and other types of not-for-profit entities.
How are contributions recognized under FASB 116?
Contributions are recognized as revenue in the period of receipt, unless they are conditional or restricted, in which case they are recognized when the condition is met or the restriction is lifted.
What is the measurement basis for non-cash contributions?
Non-cash contributions are measured at fair value, which is the price that would be received in a current transaction between willing parties.
What disclosure requirements are imposed by FASB 116?
FASB 116 requires disclosure of certain information about contributions received and made, including the types and amounts of contributions, as well as any restrictions or conditions on the contributions.
How can non-profit organizations ensure compliance with FASB 116?
Non-profit organizations can ensure compliance by reviewing their accounting policies and procedures to ensure that they are in accordance with the standard, and seeking the advice of a qualified accounting professional if necessary.