What is a Conditional Promise to Give?

A conditional promise to give is a promise by a donor to contribute assets, but only if a specified event occurs. Thus, the recipient does not have a right to the promised assets until the stipulated event has occurred. The specific event may involve any number of items, such as the occurrence of an event (such as a building being constructed) or the achievement of a specific goal (such as raising $1,000,000 in matching funds). These types of promises are usually intended to push the receiving entity to take a specific action that is desired by the donor.

Accounting for a Conditional Promise to Give

When a donor issues a conditional promise to give, the recipient should only recognize the asset when the underlying conditions have been substantially met (e.g., at the point when the promise becomes unconditional).

Examples of a Conditional Promise to Give

Here are several examples of conditional promises to give:

Required fund raising match. A donor promises a $1,000,000 gift to the building fund of the local ballet company, which is dependent upon the ballet company first raising $250,000 from other sources. The ballet company does so after six months, so it can record the promise to give as a receivable at that time.
Required government grant. A donor commits to donate $10 million to a university for a new science research facility, on the condition that the university obtain a matching amount of funding from a government grant program by the end of the following calendar year. Once the university receives the matching grant funds, it can record the promise to give from the donor as a receivable.