What is Conditional promise to give?
In short
A conditional promise to give is a donor's promise that depends on a barrier the not-for-profit must overcome, together with a right of return or release if it isn't met. It isn't recognized as revenue until the condition is met.
Key takeaways
- Cash received before the condition is met is a refundable advance (a liability).
- A donor restriction on how a gift is used is different from a condition: restricted gifts are recognized when received or promised.
- Unconditional promises are recognized when made, at present value if collected over time.
Where it's tested
FAR: Not-for-Profit Accounting — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A not-for-profit receives an unconditional pledge of $100,000 to be collected in two years. The present value of the pledge is $90,000. What contribution revenue is recognized when the pledge is received?