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Cash Contributions receivable Long-term investments Plant, property, and equipment


Total assets Accounts payable Mortgage Total liabilities Total net assets


75 225 500 430 1,230 (65) (165) (230) 1,000

Unrestricted net assets Temporarily restricted net assets Permanently restricted net assets

Total net assets



550 250 200 1,000

[FAS 164, paragraph A127, sequence 228.2]

958-805-55-65 Charity I recognizes a $1,000 contribution received in the acquisition (the excess of the acquisition date values of the identifiable assets acquired over the acquisition date values of the liabilities assumed). Charity I classifies the inherent contribution received according to the type of donor- imposed restrictions, including any imposed by the donor of the business or nonprofit activity acquired. [FAS 164, paragraph A128, sequence 229.1]

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    > > Case A: The Inherent Contribution Is Not Subject to Additional


958-805-55-66 Based on donor restrictions on Charity J’s net assets at the acquisition date, net assets with a fair value of $250 and $200 were classified as temporarily restricted and permanently restricted net assets, respectively. In this Example, Charity J is, in effect, the donor of the acquired nonprofit activity, and it imposes no additional donor restrictions. To recognize the fiduciary responsibilities to the donors of Charity J that are assumed when Charity J’s assets and liabilities are acquired, Charity I would classify changes to its net assets as follows. [FAS 164, paragraph A128, sequence 229.2]

Increase in unrestricted net assets: Contribution received in the acquisition of Charity J

$ 550

Increase in temporarily restricted net assets: Contribution received in the acquisition of Charity J

$ 250

Increase in permanently restricted net assets: Contribution received in the acquisition of Charity J

$ 200

[FAS 164, paragraph A128, sequence 229.3]

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    > > Case B: The Inherent Contribution Is Subject to Additional


958-805-55-67 Charity J is a subsidiary of Parent before the acquisition by Charity I. [FAS 164, paragraph A129, sequence 230] As a condition of the acquisition, Parent’s governing board requires that Charity I use $175 of unrestricted net assets for future capital improvements to the facility acquired.


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