Aug 18

Conditional Promises to Give

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Kimberly Perkins

As discussed in “Unconditional Promises to Give” post, promises to give can be unconditional or conditional. Conditional promises to give come with donor-imposed conditions. If the condition is not met, the donor is not obligated to fulfill the promise to give. If the donor has already fulfilled the promise but the condition is never met, the donor has a right to have the assets returned to them.

Conditional promises to give are recognized only when the conditions are satisfied. Therefore, no revenue or receivable should be recognized at the time the promise is received. If any assets are received prior to the conditions being met, the assets should be accounted for as a refundable advance (liability). Once the condition is met, the liability is removed and revenue is recognized.

Additional disclosures must be made regarding promises to give. When disclosing conditional promises to give, you should disclose the following:

  1. the total of the amounts promised; and
  2. a description and amount for each group of promises having similar characteristics, such as promises conditioned on establishing new programs, completing a new building, or raising matching gifts by a specified date.

Summary of Unconditional vs. Conditional Promises to Give

  Unconditional Conditional
Definition No conditions Donor-imposed conditions
Timing of Recognition Recognize when received Recognized when conditions have been met
Measurement Fair value Fair value
Disclosure 1) Amount receivable in less than one year, in 1 to 5 years, and in more than 5 years
2) Amount of allowance for uncollectible promises		 1) Total amount
2) Description and amount of each group of promises with similar conditions

 The following are examples of promises to give:

 Unconditional or Conditional?

  • Donor promises to give $50,000 – Unconditional
  • Donor promises to give $50,000 if donee raises $100,000 in contributions – Conditional
  • Donor promises to give $50,000 if donee’s expenses for Program A are $100,000 or greater – Conditional

    •  

    Conditional Disclosure 1:

    A trustee has agreed to match contributions to the Entity’s endowment funds on a one-for-two basis until the total reaches $5,000,000. In addition, a contributor has pledged to contribute $250,000, conditional upon proper matching with a grant.

    Conditional Disclosure 2:

    During 20X7, the Entity received restricted grants totaling $50,000 that contained donor conditions (primarily matching funds requirements). Since these grants represent conditional promises to give, they are not recorded as contribution revenue until donor conditions are met. Funds received from the donor in advance of the conditions being met totaled $20,000; are recorded as refundable advances; and will subsequently be recognized as contribution revenue when donor conditions are met.

    For more information see “Unconditional Promises to Give” for general information regarding promises to give.

    Categories: Assets, Contributions, Definitions, Financial Reporting, Gov't/United Way Agencies, Private Schools and Universities, Public/Private Foundations, Religious Organizations
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