Temporarily restricted net assets
/Temporarily restricted net assets are the assets of a nonprofit entity that have a special restriction imposed by the donor. There are two variations on this restriction, which are as follows:
Usage restriction. There is a restriction on the assets that requires the assets to be used in a certain way, such as for a student meal program.
Time restriction. There is a restriction on the assets that will be removed after a certain amount of time has passed, such as a five-year block-out period.
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Sample Disclosure of Temporarily Restricted Net Assets
The following is a sample disclosure of temporarily restricted net assets:
As of December 31, Bland Education has temporarily restricted net assets totaling $2,000,000. These funds are subject to donor-imposed restrictions that either expire with the passage of time or upon fulfillment of specific purposes. The temporarily restricted net assets consist of the following:
Scholarship improvement fund = $1,200,000
Community outreach programs = $600,000
Course development programs = $200,000
The restrictions on these assets will be released as follows:
Scholarship program. Funds will be used for awarding scholarships to students in need, per donor intent.
Community outreach programs. To be used for specific outreach initiatives, including educational and social programs.
Course development programs. Supports specific research initiatives, expected to be completed by August 31.
When the restrictions are met, these amounts will be reclassified to unrestricted net assets and reported as net assets released from restrictions in the statement of activities.