A private sector, not-for-profit hospital received a pledge of $100,000 in 2008 to be used for a building to be constructed in 2009 but contingent on the hospital being able to raise an equivalent amount from other donors. As of the end of 2008, the amount had not been raised from other donors. In 2009, the hospital raised the amount from other donors. The donor gave the $100,000 to the hospital in 2009 and the building was completed in 2009. In which year should the hospital recognize the $100,000 from the pledge?

Question

Quizplus · Accepted Answer

The hospital should recognize the $100,000 pledge in the year it was raised, which is 2009, regardless of when the building was completed. The pledge was contingent on the hospital raising the equivalent amount from other donors, and so it was not a legally binding promise until the condition was met. Therefore, it was not a fully recognized asset until 2009 when the condition was met.

A Private Sector, Not-For-Profit Hospital Received a Pledge of $100,000