Auditing and Accounting Guide by AICPA

Author:AICPA
Language: eng
Format: epub
ISBN: 9781948306201
Publisher: John Wiley & Sons, Inc.
Published: 2018-04-09T00:00:00+00:00

6.86 In subsequent periods, NFP G should amortize the use obligation based on the actuarial life expectancy of the donor and the donor’s spouse. (Because the use interest is a lease, it is not eligible for the fair value option pursuant to the Fair Value Option subsections of FASB ASC 825-10, as discussed in 825-10-15-5, and should not otherwise be adjusted to reflect changes in the rental market.) Adjustments to the use obligation to reflect amortization of the discount, the amortization of the use obligation, and changes in the life expectancy of the donor are recognized in a statement of activities as changes in the value of split-interest agreements in the same class of net assets as the contribution. Because the residence is held as an investment, the guidance in FASB ASC 958-325-35, which is discussed in paragraph 4.38, should be used for subsequent measurement of the residence. Upon the death of both the donor and the donor’s spouse, the use obligation should be closed and a change in the value of split-interest agreements should be recognized in the statement of activities in the same net asset class as the contribution. If the residence is then available for the NFP’s general use (that is, the donor has not further restricted the use of the residence or the proceeds of its sale), the carrying amount of the residence should be reclassified from temporarily restricted to unrestricted net assets. In this example, the donor was responsible for executory costs of the residence. If instead NFP G were responsible, it would report cash flows for maintaining the real estate, such as property taxes, utilities, and repairs and maintenance as period costs (as opposed to initially recognizing a liability for future period expenses).

In subsequent periods, NFP G should amortize the use obligation based on the actuarial life expectancy of the donor and the donor’s spouse. (Because the use interest is a lease, it is not eligible for the fair value option pursuant to the Fair Value Option subsections of FASB ASC 825-10, as discussed in 825-10-15-5, and should not otherwise be adjusted to reflect changes in the rental market.) Adjustments to the use obligation to reflect amortization of the discount, the amortization of the use obligation, and changes in the life expectancy of the donor are recognized in a statement of activities as changes in the value of split-interest agreements in the same class of net assets as the contribution. Because the residence is held as an investment, the guidance in FASB ASC 958-325-35, which is discussed in paragraph 4.38, should be used for subsequent measurement of the residence. Upon the death of both the donor and the donor’s spouse, the use obligation should be closed and a change in the value of split-interest agreements should be recognized in the statement of activities in the same net asset class as the contribution. If the residence is then available for the NFP’s general use (that is, the donor has not further restricted the use of

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