On December 30, 2012, Leigh Museum, a not-for-profit
organization, received a $7,000,000 donation of Day Co. shares
with donor-stipulated requirements as follows:

Shares valued at $5,000,000 are to be sold, with the proceeds
used to erect a public viewing building.

Shares valued at $2,000,000 are to be retained, with the dividends
used to support current operations.

As a consequence of the receipt of the Day shares, how much
should Leigh report as temporarily restricted net assets on its
2012 statement of financial position (balance sheet)?

(c) FASB ASC 958 requires classification of an
organization’s net assets and its revenues, expenses, gains, and
losses based on the existence or absence of donor-imposed restrictions.
It requires that the amount for each of three classes of
net assets—permanently restricted, temporarily restricted, and
unrestricted—be displayed in a statement of financial position
and that the amounts of change in each of those classes of net
assets be displayed in a statement of activities.
A temporary restriction is a donor-imposed restriction that
permits the donee organization to use up or expend the donated
assets as specified; it is satisfied either by the passage of time or
by actions of the organizations involved. Accordingly, the
$5,000,000 contribution of Day Co. shares represents temporarily
restricted net assets until the shares are sold and the proceeds
used to erect a public viewing building. The $2,000,000 contribution
of Day Co. shares represents permanently restricted net
assets because the shares are to be retained permanently.