The NFP Reporting Playbook - Virtual-2 - Eddy

2 - Eddy - Restrictions--Net-Assets

Pdf Summary

The document is a training presentation on nonprofit net asset classification and related accounting rules under FASB ASC 958.

It distinguishes between:
- <strong>Net assets without donor restrictions (NAWODR)</strong>: undesignated funds, board-designated funds, and quasi-endowments.
- <strong>Net assets with donor restrictions (NAWDR)</strong>: restrictions for <strong>purpose, time, or in perpetuity</strong>.

Examples are provided for each category, including unrestricted gifts, exchange revenue, pledges payable over time, and endowment gifts. The presentation also notes that an organization can receive a donation that is <strong>both board designated and donor restricted</strong>.

A major focus is <strong>releases from restriction</strong>, which occur when a donor restriction is satisfied or expires. This increases NAWODR and decreases NAWDR, and organizations must use NAWDR before NAWODR. The presentation also explains <strong>simultaneous release</strong>, where contributions received and used in the same period may be reported as without donor restrictions if a policy election exists.

The slides cover restrictions related to <strong>fixed assets</strong>, explaining that restrictions on gifts for construction or equipment generally expire when the asset is placed in service.

Another key section addresses <strong>endowment funds</strong>. It distinguishes donor-restricted endowments from board-designated quasi-endowments and explains disclosure requirements under ASC 958-205-50, including investment policies, spending policies, composition, and rollforwards. It also explains that earnings may be donor-restricted for purpose or subject to an implied time restriction under UPMIFA until appropriated for expenditure.

Finally, the presentation discusses <strong>underwater endowments</strong>, where fair value falls below the required corpus. The entire balance is classified as NAWDR, and specific disclosures are required about the deficiency and the organization’s spending policy.

The presentation ends with discussion questions about general support grants, time restrictions, simultaneous release, and underwater endowment reporting.

Keywords

nonprofit net asset classification

FASB ASC 958

net assets without donor restrictions

net assets with donor restrictions

releases from restriction

simultaneous release

fixed asset restrictions

donor-restricted endowment

quasi-endowment

underwater endowment