Detailed Answer
(c) Contributions should be reported as revenue in the
period of contribution, even though a donor has placed a time or
use restriction on the contribution. The $10,000 and the
$25,000 contributions should be reported as temporarily restricted
revenues on the statement of activities for the year ended
June 30, 2012. When the $25,000 is spent on fund-raising, a
reclassification of $25,000 should be reported as a deduction
from temporarily restricted revenues. This $25,000 deduction
results in a net increase in temporarily restricted net assets of
$10,000 on the statement of activities for the year ended June 30,
2012. The deduction of $25,000 from temporarily restricted
revenues also results in an increase in unrestricted revenues,
gains, and other support of $25,000. Expenses can only be deducted
from unrestricted revenues on the statement of activities.
Therefore, the fund-raising expenses of $25,000 will be deducted
from unrestricted revenues, gains, and other support that includes
the $25,000 reclassification from temporarily restricted
revenues. Alternatively, FASB ASC 958 also permits temporarily
restricted revenues to be reported as unrestricted revenues in the
year the resources are received. This alternative is allowed only
for the amount of temporarily restricted revenues that are spent
during the year. In the situation presented, $25,000 would be
disclosed as both an unrestricted revenue and expense for 2012.
There would be no need for a reclassification; however, the answer
would not change because temporarily restricted net assets
increase $10,000 as a result of the contribution that was not spent
in 2012.