Contributions – Revenue Recognition and Related Matters

Current Status Next Steps

Project proposal approved.

To be determined.

BACKGROUND

This project is being undertaken in response to the feedback from private sector stakeholders to the April 2013 AcSB/PSAB joint Statement of Principles, “Improvements to Not-for-Profit Standards.”

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The project will involve:

  • researching the recognition of revenue from contributions, as part of addressing the proposals that state:
    • pledges must meet the definition of an asset to be recorded (Principle 1);
    • a contribution stipulation must meet the definition of a liability in order to not be recognized as revenue when received or receivable (Principle 2);
    • when a stipulation gives rise to a liability, revenue would be recognized as the liability recorded pursuant to Principle 2 is settled (Principle 3); and
    • contributions of materials and services may be recognized if a fair value can reasonably be recognized (Principle 4); and
  • addressing the implications of:
    • eliminating the $500,000 size exemption in Part III of the Handbook that permits non-recognition of tangible and intangible capital assets (Principle 7); and
    • applying the referenced standards in Part II of the Handbook to the presentation of financial statements subject to retaining guidance material in Part III that addresses unique financial statement presentation issues faced by not-for-profit organizations. (Principle 13).

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PROJECT NEWS & DECISION SUMMARIES

AcSB Decision Summary – May 16, 2017
The Board discussed the feedback received to date from its Not-for-Profit Advisory Committee, including input relating to current practice and various options to account for donor stipulated contributions.

The Board also considered the next steps in carrying out research on the recognition of revenue from contributions. The Board decided to:

  • perform additional research to understand better current practices, such as on the types of not-for-profit organizations that use the deferral method or the restricted fund method and why, and the significance of different types of revenue to those organizations; and
  • consult with a range of users of not-for-profit financial statements, including, but not limited to, foundations, government funders and not-for-profit directors to understand what information they need to make decisions.  

The Board directed the staff to assess how this project should consider the research under way on Section 1000, Financial Statement Concepts and Section 3400, Revenue, in its Consultation on Priorities for Part II of the Handbook, and whether a corresponding review of Section 1001, Financial Statement Concepts for Not-for-profit Organizations, in Part III is needed.

Not-for-Profit Advisory Committee Notes – November 17, 2016
December 20, 2016. These meeting notes provide a summary of discussions held.

Not-for-Profit Advisory Committee Notes – June 21, 2016
September 23, 2016. These meeting notes provide a summary of discussions held.

AcSB Decision Summary – September 21-22, 2016
The AcSB continued its discussions on the Not-for-Profit Advisory Committee’s feedback on the scope and timing of projects subsequent to the Accounting Standards Improvements project.  The AcSB directed the staff to:

  • continue the research on contributions;
  • begin research on reporting controlled and related entities by NFPOs, including gathering information on combinations between NFPOs; and
  • continue to monitor issues and concerns on related party transactions of NFPOs.

AcSB Decision Summary – March 22-23, 2016
The AcSB also considered the Not-for-Profit Advisory Committee’s feedback on the scope and timing of projects subsequent to the Accounting Standards Improvements Project.  The AcSB agreed to assess at a future meeting:

  • the timing of subsequent projects on reporting controlled and related entities by NFPOs, and contributions;
  • initiating future projects on related party transactions and combinations between NFPOs; and
  • the need to conduct a post implementation review of Section 4470, Disclosure of Allocated Expenses by Not-for-Profit Organizations.

Not-for-Profit Advisory Committee Notes – January 6, 2016
February 29, 2016. These meeting notes provide a summary of discussions held.

AcSB Decision Summary – May 25-26, 2015
The AcSB reaffirmed its commitment to continue:

  • to maintain a separate set of standards for not-for-profit organizations in the private sector that addresses transactions and circumstances unique to this sector;
  • with the improvements process to review the standards in Part III of the Handbook and update the standards as necessary; and
  • to work in collaboration with the Public Sector Accounting Board (PSAB), with the objective of achieving consistency between private and public sector standards for not-for-profit organizations when appropriate.

The AcSB approved the creation of a standing not-for-profit organizations advisory committee to assist the Board with its standards improvements initiatives, as well as providing input on other standard- setting matters of interest to private sector not-for-profit organizations.  An invitation soliciting interest will be posted shortly at www.frascanada.ca.

The AcSB approved the following projects to address all of the Principles relating to private sector standards that were proposed in the April 2013 joint AcSB/PSAB Statement of Principles, "Improvements to Not-for-Profit Standards."

Accounting Standards Improvements
The AcSB decided to conduct an accounting standards improvements project in two phases.  The first phase of the project will address whether and how to amend the standards regarding the accounting for capital assets other than the size exemption, but including collections of works of arts and historical treasures and the disclosure of related party transactions and allocated expenses (Principles 5, 6, 8, 9, 12 and 15).

The second phase of the project will address whether and how to amend Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations, regarding how to account for controlled not-for-profit organizations and profit-oriented enterprises (Principles 10 and 11).  This phase of the project would also address the proposals related to the presentation and disclosure of expenses (Principle 14).

Contributions – Revenue Recognition and Related Matters
The AcSB approved a project to conduct further research on the recognition of revenue from contributions (Principles 1 to 4).  This project will also address the implications of the deliberations relating to the size exemption for capital assets (Principle 7) and financial statement presentation (Principle 13).

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.