Review and Discussion

Review and Discussion

1. Provide 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.

2. 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

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