In short
An endowment is a fund of assets a not-for-profit invests to provide income over the long term. A donor-restricted endowment must be kept in perpetuity or for a stated term; a board-designated endowment is set aside by the board and has no donor restrictions.
Key takeaways
- Donor-restricted endowment gifts are reported as net assets with donor restrictions.
- Investment returns on donor-restricted endowments stay with donor restrictions until appropriated for spending.
- Endowments whose value has fallen below the original gift (underwater endowments) must be disclosed.
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 donor gives a museum $1,000,000 with the stipulation that the principal be maintained in perpetuity and only the investment income be spent. How is the gift classified?