Proposed ASU Clarifies Guidance for Contributions Received and Contributions Made

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By CohnReznick LLP

The Financial Accounting Standards Board (FASB) recently issued a proposed Accounting Standards Update (ASU), Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made. The proposed ASU is intended to improve and clarify guidance on revenue recognition of grants and contracts by not-for-profit organizations.

Stakeholders have indicated that there is difficulty and diversity in practice. This diversity is most prevalent with government grants and contracts. Different interpretations can affect the timing of revenue recognized. The proposed ASU assists in distinguishing between contributions (nonreciprocal transactions) and exchange (reciprocal) transactions, and conditional and unconditional contributions. The proposed ASU guidance could result in more grants and contracts being accounted for as contributions.


Certain grants may be determined to be contracts with customers and therefore, subject to revenue recognition rules under Topic 606. However, Topic 606 is not yet effective. Therefore, the effective date of the amendments in this proposed update will be the same as the effective date of Topic 606.

Most organizations would be required to adopt the amendments during calendar years ending December 31, 2019 or fiscal years ending in 2020. However, organizations that have issued or are a conduit bond obligator would need to apply these amendments a year earlier.

The amendments would be applied on a modified prospective basis. Agreements that are not completed or are entered into after the effective date would be subject to the amendments. Agreements that have been completed (i.e. revenue has been recognized) would not be affected. No prior period results would be restated, and there would be no cumulative effect to the opening balances of net assets. An organization would be required to disclose the nature and reason for the accounting change and an explanation of the reasons for significant changes to each financial statement line item.

All stakeholders are encouraged to review and provide comments on the proposed ASU by November 1, 2017. 

Read our full alert, which further outlines guidance for contributions, click here.