FASB proposes changes in not-for-profit reporting - Financial Accounting Standards Board - includes related article

Healthcare Financial Management, April, 1993 by William R. Titera

Unrestricted contributions are to be reported as unrestricted revenues or gains, depending on whether the entity regularly solicits contributions or receives them only occasionally. Donor-restricted contributions are reported as restricted support, which increases temporarily restricted net assets or permanently restricted net assets, depending on the type of restriction. The FASB clarified the fact that contributions are presumed to be unrestricted in the absence of explicit donor stipulations or circumstances surrounding receipts that make clear the donor's implicit restriction.

Gains and losses recognized on investments and other assets (or liabilities) are to be recognized as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by donor stipulation or by law.

Receipts of unconditional promises to give with payments due in future periods (pledges) are to be reported as restricted support unless explicit donor stipulations or circumstances surrounding the receipt of a pledge make clear that the donor intended it to be used to support activities of the current period. Currently, the part of a pledge that is due in the future is usually reported as deferred revenue, or as an addition to donor-restricted funds, if restricted. Pledges with payments due in the future are to be reported based on the present value of estimated future cash flows using a discount rate commensurate with the risks involved. Subsequent accruals of the interest represent interest income to the donee.

Gifts of cash or other assets to acquire long-lived assets and gifts of long-lived assets are to be reported as restricted support unless explicit donor stipulations or circumstances surrounding the receipt of the donated assets make clear that the donor intended them to be sold to provide cash proceeds for unrestricted use.

Exhibit 3: Not-for-profit hospital statement of unrestricted
revenues, expenses, and other changes in unrestricted net
assets year ended June 30, 19XX (in thousands)
Unrestricted revenues and gains:
Net patient service revenue                 $92,650
Investment income                             3,600
Contributions                                 1,200
Other                                           950
Total unrestricted revenues and gains        98,400
Net assets released from restrictions         1,400
Total unrestricted revenues, gains,
and other support                            99,800
Expenses:
Patient care                                 87,180
Management and general                       10,400
Total expenses                               97,580
Increase in unrestricted net assets           2,220
Not-for-profit hospital statement of
changes in net assets year ended June
30, 19X1 (in thousands)
Total unrestricted revenues and gains       $98,400
Net assets released from restrictions         1,400
Total unrestricted expenses                 (97,580)
Total unrestricted revenues and gains         2,200
Temporarily restricted net assets:
Contributions                                 1,250
Investment income                               200
Net assets released from restrictions        (1,400)
Increase in temporarily restricted
net assets                                       50
Permanently restricted net assets:
Contributions                                   280
Investment income on endowment                   50
Increase in permanently restricted
net assets                                      330
Increase in net assets                        2,600
Net assets at beginning of year              82,440
Net assets at end of year                   $85,040