Cash received by a nongovernmental not-for-profit organization in year 1 that the donor stipulates is to cover operating expenses of the following year should be recognized as an increase in net assets with donor restrictions in year 1 and as net assets released from restrictions in year 2.

Question

Quizplus · Accepted Answer

Cash received with donor restrictions should be initially recognized as an increase in net assets with donor restrictions, and then recognized as net assets released from restrictions when the restrictions are fulfilled (in this case, in year 2 when the operating expenses are incurred).

Cash Received by a Nongovernmental Not-For-Profit Organization in Year 1