The new FASB ASU 2014-09, Revenue from Contracts with Customers raised questions as to whether grants and similar contracts are in scope of the new guidance (being reciprocal or nonreciprocal)
The new FASB ASU 2014-09, Revenue from Contracts with Customers raised questions as to whether grants and similar contracts are in scope of the new guidance (being reciprocal or nonreciprocal). I would like to briefly identify the general attributes that might affect grants a contract for Non-profit organization
Question 1: Exchange vs Nonexchange
In determining if the contract is an exchange or a nonexchange transactions we need to determine who receives the benefit.
If the there is a “direct commensurate value to resource provider or if the resource provider is a 3rd party payer on behalf of an identified customer (The revenue recognize would be the underlying contract’s patient service revenue, tuition revenue, etc.), then it’s an EXCHANGE and should follow ASC 606
Question 2: Conditional vs Unconditional
If the benefits are received by a specified third party and the third party is not a customer of the Non-profit or if the benefits are received by the general public, then it’s a NONECHANGE transactions and follows topic 958-605.
In order for a donor-impose condition to exist there must be:
- A right of return/release
- The agreement must include a barrier that is tied to that right of return/release. To determine what is a barrier a non-profit can consider indicators in the contribution such as level of service, specific output or outcome or the extent to which a stipulation limits discretion by the recipient on the conduct of an activity (example to follow OMB regulations)
