FASB ASC 958 Quick Reference

What ASC 958 Is and Why It Matters

FASB Accounting Standards Codification Topic 958 — Not-for-Profit Entities — is the accounting standard that governs how nonprofit organizations classify and report their financial resources. It establishes the rules for net asset classification, contribution revenue recognition, functional expense reporting, and the disclosures your organization must include in its audited financial statements.

For mid-sized nonprofits managing grants and restricted gifts, ASC 958 is not abstract theory. It is the framework your auditor uses when reviewing your statements, the standard your board should reference when asking about restricted fund balances, and the basis for the disclosures your major funders expect to see in your IRS Form 990. Misapplying it is one of the most common sources of audit findings at organizations in the $500K–$10M budget range.

This guide covers the core concepts in the order you are most likely to encounter them in practice — starting with net asset classification, moving through contribution recognition, and ending with the disclosures and checklist your team can use at annual close.

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Net Asset Classification: The 2016 Simplification

Before ASU 2016-14 (effective for fiscal years beginning after December 15, 2017), nonprofits classified net assets into three categories: unrestricted, temporarily restricted, and permanently restricted.

ASU 2016-14 eliminated the “temporarily restricted” and “permanently restricted” labels and replaced them with two categories:

Net assets without donor restriction — Resources that are available for general use in carrying out the organization’s mission. This includes what was previously called unrestricted net assets, plus any board-designated amounts (which are internally restricted but not donor-restricted).

Net assets with donor restriction — Resources subject to donor-imposed restrictions that have not yet been met. This combines what was previously called temporarily restricted (restrictions that will lapse over time or upon meeting a purpose condition) and permanently restricted (restrictions that must be maintained in perpetuity, such as endowment principal).

The two-category model is simpler on the face of the financial statements but requires more disclosure in the notes — specifically, organizations must now provide additional information about the nature and amounts of the restrictions within the “with donor restriction” category.

Why this matters operationally:

Your accounting system must track individual restrictions at the fund level, not just the aggregate “with donor restriction” total. When a funder asks “what is the unspent balance on our grant?” or when an auditor asks you to support the restricted net asset balance on your balance sheet, you need to be able to produce a fund-by-fund listing — not just a summary figure.

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