Not-for-profit accounting under US GAAP (ASC 958)

Which organizations follow ASC 958?

Not-for-profit entities: organizations that receive significant contributions from resource providers who expect no commensurate return, operate for purposes other than providing goods or services at a profit, and have no ownership interests like those of a business. Examples include charities, private foundations, private colleges and universities, nonprofit hospitals, religious organizations and trade associations. Governmental organizations, such as public universities and state hospitals, follow the standards of the Governmental Accounting Standards Board instead. ASC 958 adds to the rest of US GAAP: a not-for-profit organization applies ASC 606 to tuition, patient fees and ticket sales, ASC 842 to leases, and the other topics as a business would.

What financial statements does not-for-profit accounting require?

• Statement of financial position: assets, liabilities and net assets, split between net assets with donor restrictions and without donor restrictions. Board-designated funds, such as a quasi-endowment, remain without donor restrictions.
• Statement of activities: revenues, gains, expenses and releases from restrictions, showing the change in each class of net assets. An operating measure is optional, but must be explained if shown.
• Statement of cash flows, direct or indirect method.
• Analysis of expenses by function and nature, such as program services, management and general, and fundraising, against salaries, rent and depreciation, on the face of the statements, in a separate statement or in the notes.
• Liquidity disclosures: how the organization manages liquid resources, and the financial assets available for general expenditure within one year.

A not-for-profit in practice: a year at a food bank

A food bank with a December year end receives $900 thousand of cash gifts with no restrictions, donated food worth $60 thousand that it distributes, and $20 thousand of pro bono work from a volunteer accountant. A foundation gives $400 thousand restricted to a youth program, of which $250 thousand is spent in the year. A donor promises $100 thousand a year for the next 3 years, recognized at its present value at 4%. A government awards a $500 thousand cost-reimbursement grant, of which $200 thousand of qualifying costs are incurred. Figures are in $ thousand.

The restricted grant is recognized in full when received, in net assets with donor restrictions, and $250 thousand is released as the program spends it. The pledge is recognized at $278 thousand, also with donor restrictions because the cash arrives in later years; the discount unwinds as contribution revenue. The government grant is conditional: only the $200 thousand of costs incurred overcome the barrier, so the remaining $300 thousand is disclosed, not recognized. Because the condition and the restriction are met in the same period, the food bank reports it as without donor restrictions under a simultaneous release policy. Total expenses of $1,380 thousand include the donated food and the accountant's services, each recognized as both revenue and expense.

Is a grant a contribution or an exchange?

ASU 2018-08 asks whether the resource provider receives commensurate value in return. A government agency or foundation funding a program that benefits the public does not, so its grant is a contribution under ASC 958-605; a sponsor paying for research results it will own, or a customer paying for a service, is an exchange under ASC 606. A contribution is conditional if the agreement includes both a barrier the organization must overcome, such as a matching requirement or a measurable level of service, and a right of return of assets or release from the promise; it is recognized only when the barrier is met. Donor restrictions, by contrast, limit how or when a gift is used but do not delay recognition.

How are pledges, gifts in kind and volunteer services recorded?

• Unconditional promises to give are recognized when made, at fair value, with promises due in later years discounted and an allowance for amounts not expected to be collected. They are outside the CECL model in ASC 326.
• Contributed nonfinancial assets, such as food, supplies or the use of a building, are recognized at fair value and, since ASU 2020-07, presented as a separate line in the statement of activities with disclosure by category.
• Contributed services are recognized only if they create or enhance nonfinancial assets, or need specialized skills, such as accounting, legal or medical work, that the organization would otherwise buy. General volunteering is not recognized.

How are endowments and investments reported?

A donor-restricted endowment, which must be held in perpetuity or for a period, sits in net assets with donor restrictions, and its investment return is restricted until appropriated for spending under the state's version of the Uniform Prudent Management of Institutional Funds Act. Investments are generally measured at fair value, and the investment return is presented net of external and direct internal investment expenses. Organizations disclose underwater endowment funds, whose value has fallen below the original gift. See ASC 820 fair value measurement.

What other rules are specific to not-for-profits?

• Government grants: ASU 2025-10, which adds grant accounting for business entities, does not apply; not-for-profits keep applying the contribution model. See IAS 20 vs US GAAP.
• Goodwill: since ASU 2019-06, a not-for-profit can elect the private company alternatives to amortize goodwill and subsume some intangible assets into it. See private company alternatives.
• Combinations of not-for-profits are mergers, creating a new entity at carrying amounts, or acquisitions, under ASC 958-805.
• The Form 990 filed with the IRS is a tax return with its own rules, although its functional expense analysis draws on the same records.

In September 2026 the FASB reported that it had not added further not-for-profit topics, such as liquidity disclosures and operating measures, to its technical agenda, and will continue to discuss them with its Not-for-Profit Advisory Committee.

How does this compare with IFRS?

IFRS Accounting Standards are written for profit-oriented entities and have no not-for-profit standard. Many countries have their own charity frameworks, such as the Charities SORP in the UK, and the IFR4NPO initiative, led by CIPFA and Humentum, has developed International Non-Profit Accounting Guidance (INPAG), based on the IFRS for SMEs Accounting Standard, for countries without one. See what is US GAAP.

This guide is general information. It is not tax or legal advice for your situation.