Not-For-Profit Revenue Recognition

Revenue Resources and related Accounting Guidance.

Most of the NFP (Not-For-Profit) entities have 2 sources of income/revenue. The first source is contribution revenue collected from grants/contributions/donations and fund-raising events. The second source of revenue is exchange income (earned income) such as membership fees, tuition, registration fees, and sold goods/services. Contributed income is accounted for under ASC 958-605 while exchange earned income is accounted for under ASC 606. To determine if the revenue transaction is an exchange transaction or contribution transaction, management should review the following:

  • A resource provider is not synonymous with the general public. A benefit received by the public as a result of the assets transferred is not equivalent to commensurate value by the resource provider.
  • Execution of a resource provider’s mission or the positive sentiment from acting as a donor does not constitute commensurate value received by a resource provider for purposes of determining whether a transfer of assets is a contribution or an exchange.

Contributions are transactions in which the donor expects nothing in exchange for the amount given to the not-for-profit entity.

Exchange Transaction

Exchange transactions are transactions in which the donor receive or expect to receive goods or services in exchange of the amount given.

Many not-for-profit entities believing that every source of income now needed to be accounted for under ASC 606, but only those transactions that the donor receives goods/services in return for his contribution should be accounted for under ASC 606.

Exchange and contribution transaction

In some instances, the NFP entity can have an exchange (earned income) and contribution transaction. For example, a NFP entity sponsor a fund-raising event such as sport tournament to provide funds for general operating. The NFP receives contributions from donor for the tournament’s tickets before the tournament being held. If the entrance ticket price is a nonrefundable $100 but one of the donors paid $500, then that is an exchange and contribution transactions. If the cost of the tournament is $100 per ticket, then the entity should recognize $100 as exchange revenue once the tournament is held. The remaining should be recognized as contribution.  Here’s a breakdown of the entries:

Upon receipt of the entrance fees:

Dr: Cash $500

Cr: Contract Liability $100 (for the cost of the tournament recognized as an exchange revenue)

Cr: Contribution revenue (With time restriction)

When tournament is held

Dr: Contract liabilities $100

Cr: Special event revenue: $100

The accounting treatment for NFP revenue recognition can be challenging and time consuming, if you need help, we can help your organization properly account for the gifts your organization receives. We have helped many NFP entities with their revenue recognition, so we’re pretty familiar with the process. Contact us if you have any questions or you need help with your entity’s accounting


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