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The ability of investors, taxpayers and researchers to compare financial statements issued by hospitals, universities and other governmental agencies is affected by their understanding of current accounting and reporting rules. Publicly owned not-for-profit organizations report different financial results from those that are privately owned. This study looks at the historical events that brought about the accounting and reporting divergences, discusses the recognition and reporting differences, and explores the implications for statement users.

The Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB) have issued significantly different accounting and financial reporting standards for contributions. These standards are particularly significant for reporting by private and public institutions of higher education. This paper summarizes many of these differences including timing of revenue recognition, classification of contributed resources, recording pledges, and recognition of “collections.” A framework is suggested for evaluating accounting and financial reporting standards for contributions. Finally, recommendations are made to both FASB and GASB for changes to make their standards more consistent.

The ability of financial statement users, investors, donors and academic researchers to compare financial information issued by nonprofit universities, hospitals, fund-raising organizations and government agencies is affected by their understanding of current accounting recognition and reporting guidance. Public nonprofit organizations report different financial results from private nonprofit organizations. This study looks at the events that brought about the divergence in nonprofit financial accounting recognition and reporting for higher education institutions, discusses specific differences, and offers a look at additional changes in recognition and reporting for the sector currently underway.