Cash received by a nongovernmental NFP in year 1 that the donor stipulates is to cover operating expenses of the following year should be recognized as an "increase in temporarily restricted net assets" in year 1 and as "net assets released from restrictions" in year 2.

Question

Quizplus · Accepted Answer

This approach results in matching the operating resources (net assets released from restrictions) and the related expenses that both affect unrestricted net assets in the same fiscal year, year 2. The contribution is reported in the statement of activities for year 1, under the caption "changes in temporarily restricted net assets". Year 2 will show a decrease in temporarily restricted net assets and an increase in unrestricted net assets in equal amounts.

Cash Received by a Nongovernmental NFP in Year 1 That