How does the FASB Staff Position affect the accounting and reporting of donor-restricted endowments under UPMIFA?
According to FSP 117-1, and consistent with guidance in Statement No. 117, a portion of a donor-restricted endowment must be classified as permanently restricted net assets. The portion classified as such must be in accordance with either the donor stipulations or the amount the organization’s governing board determines must be retained permanently under relevant law. Because UPMIFA states that donor-restricted endowments are restricted until appropriated for expenditure, the FSP clarifies that there is a time restriction on the portion of a donor-restricted endowment fund that is not permanently restricted. The FSP also modifies a requirement in paragraph 17 of Statement 116, commonly known as the “deemed spent” rule. That is, donor-imposed restrictions are no longer considered fulfilled when a similar expense is incurred. Consequently, independent institutions in UPMIFA states will likely have significant reclassifications from unrestricted net assets to temporarily restricted net as
