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Donation for the design, construction and outfitting of a new building
Hi!
How do you handle releases from restriction for a donation designated “to be used exclusively for the design, construction, and outfitting of the building”? Should the release occur as construction progress is made, or should we wait until the building is placed in service? What is the FASB codification that supports your decision.
Thank you,
Angie
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5 Replies
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Angie, You do not need to wait until the building is in service; as long as the restriction is satisfied (the design or construction etc.), you can release the funds (ASC 958-605-45-2).
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Thank you so much for your response. I’m having a hard time understanding this. I see that 958-605-45-2 has been superseded by ASU No. 2014-09 – Hence this is where my question originated.
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I’d lean towards releasing the restriction as the qualifying construction costs are incurred, rather than waiting until the building is placed in service. The donor’s wording is important here, so I’d review the gift agreement carefully. I’d also confirm the treatment with your accountant and check the relevant FASB guidance, particularly ASC 958-205.
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In my view, the release should generally follow the purpose of the donor restriction. Amounts can be released as eligible construction and outfitting costs are incurred rather than waiting until the building is placed in service. The key FASB guidance is ASC 958-205-45-9. This addresses the release of donor-imposed restrictions when the specified purpose or time restriction is satisfied.
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From what I have seen, gradually releasing a restriction as construction milestones are completed can be a good approach, provided the gift terms and accounting guidance support it. The timing should be based on the specific restriction and applicable accounting requirements rather than waiting automatically until the building is fully in service. Clear communication with the donor about progress can also help avoid misunderstandings.
