FASB proposes to clarify how not-for-profits and others account for grants and similar transactions

KPMG reports on the FASB’s proposal to clarify how not-for-profits and others account for grants and similar transactions. The proposed ASU would address practice issues by helping entities evaluate whether they should account for a grant or similar contract as a contribution or an exchange transaction.

Applicability

Proposed ASU on ASC 958

• Not-for-profit entities, including healthcare entities
• Entities that receive or make contributions of cash or other assets

Relevant dates

• August 3, 2017 – FASB issued proposed ASU
• November 1, 2017 – Comments due on proposed ASU

Mandatory effective dates and early adoption provisions:

* NFPs that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market

Key impacts

• Some grants that are considered exchange transactions today would be accounted for as conditional contributions
• Some grants that are considered unconditional contributions under current US GAAP would be considered conditional
• The proposed ASU is intended to reduce diversity in practice and enhance comparability among entities

Report contents

• Applicability
• Key facts and impacts
• Analyzing transactions under the proposed ASU
• Determining whether a transaction is a contribution or an exchange transaction
• Determining whether a transaction is a payment from a third-party payer
• Determining whether a contribution is conditional
• Indicators of a barrier to entitlement
• Effective dates and transition