Nonprofit Accounting Basics

Donor Imposed Restrictions

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.


What are "donor-imposed" restrictions?

FASB116 focuses on the concept of restricted revenue. Under FASB116 all contribution revenue must be classified as either: unrestricted, temporarily restricted or permanently restricted. The existence of restrictions is determined by "donor-imposed" restrictions, internal restrictions (such as Board designated funds) are considered unrestricted.

  • Permanently restricted support includes all contributions, which are not expendable by the NFP.
    • The most prevalent example of this is an endowment fund. Typically the organization is not able to use the principal but is able to use the investment earnings. 
    • The earnings on permanently restricted funds may be further restricted for use for a given purpose, thus resulting in temporarily restricted revenue.
  • Temporarily restricted consists of contributions with donor-imposed restrictions that limit the use of the funds as follows:
    • Purpose-restricted: These are funds that are donor-restricted for use on a particular project.
    • Time-restricted: These are funds that are donor-restricted for use in a certain time period. An example of this is a unconditional pledge that stipulates the funds will be donated to the NFP over a 5-year period. The amount to be received in future years is considered time-restricted.
  • Unrestricted support consists of all other revenue