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Not-For-Profit: Clarification for Contributions Received and Contributions Made

June 27, 2018
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Clarification for Contributions
Received and Contributions Made

On June 21, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (ASU 2018-08).

This new ASU provides clarification surrounding contributions received and made by nonprofits, as well as new guidance related to the accounting for federal grants and similar contracts received by nonprofits.

Conditional vs. Unconditional Contributions

ASU 2018-08 provides for clarification in the evaluation criteria for determining whether contributions are unconditional or conditional. Recognition or deferral of such contributions must now consider whether both:

  • A "barrier" exists for which the recipient must overcome in order to be entitled to the gift; and
  • A right of return exists if the barrier noted above is not met.

Entities that receive contributions that meet both conditions above should reflect the contributions as conditional. Specific examples of barriers, other considerations, and a flowchart are included within ASU 2018-08 to assist nonprofits in their evaluation.


The ASU provides new guidance to clarify what is an exchange transaction. Prior to this ASU, many nonprofits often accounted for governmental grants as exchange transactions adhering to the theory that governments generally do not provide contributions. ASU 2018-08 requires the consideration by the nonprofit as whether the grant is reciprocal or nonreciprocal and whether commensurate value is transferred. As such, most nonprofits going forward will classify these governmental grants as conditional contributions rather than as exchange transactions. This is particularly significant to nonprofits as it may provide exemption from ASC 606 (revenue recognition). A flowchart has been provided within ASU 2018-08 that will assist nonprofit organizations in their evaluation.

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How Can We Help

ASU 2018-08 will become effective, for most entities, concurrent with ASC 606 – Revenue from Contracts with Consumers and Citrin Cooperman’s Not-for-Profit professionals can assist you in further understanding the changes, implementation, and impact the new ASU may have to your organization.