A not-for-profit arts organization receives a $300,000 gift from a donor who specifies that the gift must be maintained in perpetuity,and the income from the gift is to be used only to take disabled persons to the theater.The entity derives $20,000 from investing the gift,but has not spent it by year-end.How should the entity report the $20,000 of resources in the net asset section of its statement of financial position?

Question

Quizplus · Accepted Answer

The $20,000 of income derived from the gift should be reported as temporarily restricted because the donor specified that the income from the gift must be used for a specific purpose (taking disabled persons to the theater), but did not require that the principal amount ($300,000) be maintained in perpetuity for that specific purpose. The principal is permanently restricted, but the income generated is temporarily restricted until it is used for the purpose designated by the donor.

A Not-For-Profit Arts Organization Receives a $300,000 Gift from a Donor