A not-for-profit animal shelter received a donation of medical supplies with a fair value of $15,000. These supplies are intended for immediate use in treating animals and were consumed entirely within the current fiscal year. The donor specified that the supplies must be used for animal care. How should this donation be reported in the Statement of Activities?
- AAs an increase in net assets with donor restrictions for $15,000 and a simultaneous reclassification out of net assets with donor restrictions for $15,000.
- BAs an increase in net assets with donor restrictions for $15,000.
- CAs revenue from contributions without donor restrictions, with the expense recognized when consumed.
- DAs an increase in net assets without donor restrictions for $15,000.
Show answer & explanationAnswer & explanation
Correct answer: A. As an increase in net assets with donor restrictions for $15,000 and a simultaneous reclassification out of net assets with donor restrictions for $15,000.
When donor-restricted contributions of supplies are received and consumed within the same fiscal period, NFPs have a policy choice. They can report the contribution as an increase in net assets with donor restrictions and simultaneously reclassify it to net assets without donor restrictions, reflecting the satisfaction of the restriction. Alternatively, they can bypass the temporary restriction if the restriction is met in the same period.
Why the other options are wrong
- B. This is incomplete; the restriction was met in the same period, requiring a release.
- C. This is incorrect. The contribution had a donor restriction, even if satisfied quickly.
- D. This would be incorrect because the donor imposed a purpose restriction.
Donor-Restricted Supplies Consumed
When donor-restricted contributions of supplies are received and consumed in the same reporting period, an NFP can elect a policy to either report the contribution initially as 'with donor restrictions' and then release the restriction, or directly report it as 'without donor restrictions' if the restriction is met immediately.
- Donor-restricted supplies for immediate use.
- Consumed in the same reporting period.
- NFP can elect a policy for recognition.
- Option 1: Record as restricted, then release.
- Option 2: Record directly as unrestricted (if restriction met immediately).
Memory trick: Supplies used fast, restriction passed, report it transparent.