Nonprofit Update: October 2018

Is there really a tax cut in the TCJA for exempt organizations?
Potential tax increase for exempt organizations hidden in the TCJA as part of the corporate tax cut.

Cybersecurity: Understanding the threat
Answer our five-question online assessment to help evaluate how your security program stacks up.

Changes to accounting for grants and contributions made and received
An overview of the clarifications to identifying reciprocal and nonreciprocal transactions and conditional and unconditional contributions.

Managing lease accounting for public and private higher education
Colleges and universities must adjust to the new level of judgments and estimates required under ASC 842 and GASB 87 lease accounting.

Recorded webcast: 2018 federal grants management update
Learn about current developments in grants management compliance requirements for nonprofits.

 

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP. This includes regular updates on the latest insights for nonprofit organizations.

What Non-Profits Need to Know About ASU 2018-08

The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2018-08. This update improves and clarifies the guidance regarding contributions received and contributions made.

The board found that there was a lack of clarity and consistency in how grants and contracts were characterized as either exchanges or contributions. In addition, they found that non-profit organizations differed in how they determined if contributions were conditional or unconditional.

“That’s important because that distinction between conditional vs. unconditional impacts the pattern of revenue recognition,” said Christine Botosan, FASB Board Member.

top tab folder labeled grants related to ASU 2018-08

ASU 2018-08 provides criteria for determining between exchanges or contributions by looking at whether the provider is receiving commensurate value in return for resources transferred. This clarification will help organizations determine if the transfer should be treated as a contribution (nonreciprocal transaction) or an exchange (reciprocal) transaction.

Note that the “commensurate value” described above is value to the provider, not to the general public. So, funds transferred from New York State would be considered a contribution unless New York State itself receives commensurate value.

If commensurate value is not provided, the organization should determine if the transaction is a third-party payment for an existing exchange transaction (such as Medicare, Medicaid, Pell Grant, etc.) If commensurate value is not provided, and the transaction isn’t a third-party payment, it should be accounted for as a contribution.

The ASU also provides additional detail on how to distinguish conditional contributions from unconditional contributions, as well as the difference between donor-imposed conditions and donor-imposed restrictions. Conditional contributions must include a barrier that must be overcome and a right of return or right of release. If a contribution is determined to be unconditional, it must be analyzed to determine if it is restricted or unrestricted.

ASU 2018-08 applies primarily to non-profit organizations, however it can apply to organizations that receive or make contributions of cash and other assets, including businesses. It does not apply to transfers of assets from governments to businesses.

The amendments in this ASU are effective for reporting periods beginning after June 15, 2018 for non-profit organizations and public companies serving as resource recipients (and December 15, 2018 for other organizations). For non-profit organizations serving as resource providers, the amendments are effective for reporting periods beginning after December 15, 2018 (and December 15, 2019 for other organizations.) Early adoption is permitted.

For more information on ASU 2018-08, visit https://www.fasb.org/home.

For more information on Insero’s non-profit solutions, visit https://inserocpa.com/clients/non-profits.html or contact us today.