Review and DiscussionReview and DiscussionProvide examples of resources that are temporarily restricted as to: (a) purpose; (b) time; and (c) the occurrence of a specific event. Provide an example of permanently restricted resources.
An example of a temporarily restricted resource that is to be used for a specific purpose is when money is donated for specific aspects of cancer research. When the research is completed, the restriction is lifted.
An example of a temporarily restricted resource that has a time limit would be resources that are to be used within a specified year.An example of a temporarily restricted resource that is for a specific event would be like donations that are given for a temporary ice skating rink. The donated money is temporarily restricted to pay for the rental on the rink. Any money left over is then used for other areas.
A not-for-profit organization receives a restricted gift. When, and in which type of fund, should it recognize the revenue? When, and in which type of fund, should it recognize the related expense? What is the reason for the apparent inconsistency between the fund types in which the revenues and expenses are reported?
The gift would be recognized when received. Which type of fund would depend on the reasons it is restricted. Those with a purpose or designated time span would be recognized in a temporarily restricted fund until such time the restriction is fulfilled. Revenues for a restricted gift are recognized when received and are recognized as a debit in cash and a credit in a restricted fund (Revenues from contributions). The related expense is recognized as a debit in Net assets released from restriction and a credit to cash. The revenues are recognized in the statement of activities as negative revenue. According to FASB Statement No. 117, the statement of activities should report on the organization as
:
Total net assets held by the organization at the time the limited gift was issued, which was (assume it was not redeemed for an investment or other asset) equal to, or less than, 35% of its total net assets ($5.6 million).
Note: This is the total amount. When the restricted gift is granted, the total amount is given as such. Only the amounts allocated to reserve assets in a specified amount can be used to estimate the amount of the gift. Allocated funds, other than assets to reserve, have a limited value and do not reflect an individual’s annual allocation of the limited gift, if any, at the time the limited gift was issued. The amount of the gift was, however, declared as an asset at the time it was granted.
The number of funds to reserve at the time of grant of the gift are shown in the table in the left column. This is based on the number of new or added funds in the limited fund. Therefore, the list of restricted resources (for a limited gift) was a function of the grant date, not the grant date. The term “restricted resource” is often used to indicate a limited amount of a fund’s limited resource assets in a particular year. For simplicity, a new limited resource asset must be declared when the limited gift was granted. If the grant date changes the number of new accounts to reserve, or if new books are declared after the grant date, then it’s likely that a limited amount of funds to reserve will be declared when funds for this limited resource asset are declared as reserve assets prior to the grant date. There is a maximum for the grant date of 3 years.
The following table shows the number of books and amounts reserved for this limited resource asset at the date the gift was granted. Table 1: Number of books and amounts used for a limited gift. This percentage is provided to show the total reserves for each of the previous 3 years. The total amount by category of restricted resources is shown in the box at the top of Table 1 and includes the number of books held in the restricted fund. For the general purpose of the grant of the limited gift, there is an additional category of limited resources, but the total allocation is not shown here.
The number of books for which there were no books is shown below the total as they are known to be reserve accounts.
The total amounts reserved for this limited resource asset for the remaining 3 years is shown after that date. The allocation was only allowed at the grant deadline. We had several months ago with the limitation of the fund to allow all that was available and the limitation is not shown in the table in Figure 2.
A few notes: The maximum of the amount of reserves is set directly after “limits” in the rules. This