Discussion:Promise to Give Footnote

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Discussion Forum Index --> Accounting Questions --> Promise to Give Footnote

Gp (talk|edits) said:

25 June 2013
PPC’s wording for Promises to Give Footnote is as follows:

Unconditional promises to give are recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received.

My questions pertains to the last half of the footnote – decreases of liabilities, or expenses depending on the form of the benefits received”

What does this mean and what is an example of this and when would this be the case?

Any help would be appreciated.

Thank you

Fr. Mackelhenry (talk|edits) said:

25 June 2013
expenses depending on the form of the benefits received.

It's like if someone gives you a giraffe. Technically it's an asset, but it will only take it a week to eat all the leaves off your trees, and then you'll have to have leaves shipped in for it. Plus a giraffe drinks a lot of water, he can hold 50 gallons in his neck before the water even hits his stomach*, so you'll have to have a small pond installed as well, This just gives some idea of the expenses we are talking about.

Don't ever accept a promise to give you a panda, they only eat bamboo and some of them are picky, and will insist on bamboo which only grows on a couple of acres in Red China.

.*While in the giraffe's neck, the water should be accounted for as work in progress. Technically, the giraffe's excretia would be classified as inventory, but the government does not require this kind of detail. If it was a steer, the meat would be the inventory that resulted from his eating grass and water and corn and salt. A steer is a meat factory, and you have to account for the inputs as they proceed through the factory and into the finished product. But poeple don't eat giraffes. Well, maybe a few people do.

Natalie (talk|edits) said:

June 28, 2013
". . . decreases of liabilities, or expenses depending on the form of the benefits received." That's a great question. Generally when an unconditional promise to give is recorded, it's a pledge receivable. I can't think of any examples for reduction of liabilities or expenses.

Podolin (talk|edits) said:

28 June 2013
I have precisely zero experience in this area and have done that same amount of research on the question. However, I will speculate that, if the pledge is that the donor will directly pay off a liability, the entry would be to debit the liability and credit revenues. If the pledge is that the donor will pay the executive director's salary for 6 months, the entry would be to debit salary expense and credit revenues. I think those would ONLY apply if the pledge is specifically directed as described. If the pledge is general in nature, debit receivables (asset) and credit revenues.

There must be some literature on this, no?

Natalie (talk|edits) said:

June 29, 2013
I was thinking the same thing, Podolin, but if that's the case, then the nonprofit would likely be forced to track these types of pledges outside of the accounting system. I believe the source of this is the prior SFAS 116 for anyone who is interested in checking.

Podolin (talk|edits) said:

29 June 2013
Totally apart from GAAP for charitable orbs., we have similar tax questions: Discussion:Form 990 v 990EZ which one to file and Discussion:Cat lady deduction effect on 990 and public charity status

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