Accounting Rules Changes Proposed for Government Grants and Contracts

The Financial Accounting Standards Board (FASB) is seeking public comments on a draft Accounting Standards Update (ASU) for recognizing revenue from grants and contracts (Topic 958). The proposed revision is intended to improve and clarify the distinction between “contributions” and “exchange transactions” for nonprofit organizations to encourage greater consistency in how nonprofits account for the revenue. If approved, it is likely that more grants and contracts will be considered contributions, which would then need to be categorized as either conditional or unconditional to apply the proper accounting procedures. A conditional contribution under the proposed revision is typically what nonprofits currently refer to as an exchange transaction or contract. As a result, the draft makes the curious assumption that a government entity does not receive reciprocal value from a nonprofit providing services on its behalf (which is why it is not considered an exchange transaction). FASB is seeking public comment on the proposed changes until November 1, 2017.

(Source: National council of Nonprofits, August 7, 2017)

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