This ASU will help organizations determine whether revenue transactions should be considered as contributions in the coding of accounting standards (CSA). Non-recipient companies or in the form of an exchange transaction subject to the theme ASC 606, amended by ASU 2014-09 – affectionately known as “Rev Rec standards” – Consider the use of purchase contracts or contribution agreements: as mentioned above, grant recipients generally have only a minimum liability and reporting obligation. On the other hand, departments can check recipients to ensure that the conditions of a program are met and that the funds have been used correctly. An exchange transaction is when the donor receives something directly in exchange for the funds made available at about the same value as the goods or services that the donor receives directly. The AISB guidelines make it clear that grants to the general public are not exchange operations, as the donor is not directly equivalent. In its accounting method on this subject, the University of Notre Dame notes that “sponsorship institutions, private foundations and/or donors can use the terms [subsidy and contribution] interchangeably, both in the interview and in the donor instruments, which contributes to the complexity.” Although the terms can be used interchangeably, they probably shouldn`t be – the meanings are very different. In many cases, the organization that signs a contribution agreement with the government/agency does so under the understanding of a non-profit clause. An organization accepts this approach because the risks associated with the agreement are shared and, in many cases, where the services provided are in accordance with the agreement, all risks are the responsibility of the government and not the organization. Mutual transaction (exchange) in relation to the other (contribution) A subsidy can be either an exchange transaction or a contribution, depending on the grant agreement. In fact, the words “subsidies” and “contributions” have been used historically synonymously, leading to misconceptions. The distinction between the two depends on the following differences: in the case of an exchange, both parties get about the same value (a reciprocal transaction), while the recipient of a contribution has nothing to do to deserve it (a non-reciprocal transaction).
Principle 4: A contribution agreement does not allow for the award of damages in the event of non-compliance.