Ask the Accounting Community

Accounting for gift annuities

  • 1.  Accounting for gift annuities

    Posted 01-19-2019 05:15 PM
    We are a NFP organization and we recently received a significant amount for a gift annuities. The gift is irrevocable and restricts for a specific porpoise. I have calculated the NPV of the gift and I just need guide on how to record this it in the GL. Also if you have dealt with this type of transaction could you please share with me if we can commingled this gift with my main investment or should we keep it in a separate investment.

  • 2.  RE: Accounting for gift annuities

    Posted 01-20-2019 03:17 PM

    Record the principal as a pledge receivable in the net assets with donor restrictions; if the purpose has not been met when you receive the cash, recognize interest revenue and cash in the net assets with donor restrictions.

    If the purpose has been met, along with the release of the receivable amount for that period  recognize the interest revenue in net assets without donor restrictions.


    Whatever works best for the management of the gift is how you should record the gift – but you need to track that this gift is being used for its specific purpose.


    Hope this helps.


    Sent from Mail for Windows 10


  • 3.  RE: Accounting for gift annuities

    Posted 01-21-2019 02:01 PM
    To be clear, you have receive a gift (or more likely are the beneficiary of an annuity) payable over multiple years. 
    In your GL, you would credit 'Income - Restricted gifts' or whatever equivalent account you have and debit cash (for any amount received in the current year, short term receivables (for the amount to be received next year), and long term receivables for the remainder. At year end, the Income - Restricted would be closed out to your Restricted Gifts equity account. Also, any expenses which meet the purpose of the gift are closed to that account. 
    In practicality, however, most organizations post the NPV to Accounts Receivable. 
    So, a thousand dollar gift over five years with an NPV of $920. (i am just splitting the interest for this illustration)
                                                 Debit            Credit
    AR                                          920
    Restrict Income                                             920
    1st year pymt
     Cash                                     200
    AR                                                                200
    2nd year 
    Cash                                     200     
    AR                                                              180
    Interest inc                                                   20
    You may commingle your funds, but as you should not 'borrow' from restricted gifts, you must ensure that your investment fund never goes below that amount of restricted gifts actually received and not used for the restricted purpose. 
    In the example above, assume there was a $100 expense that met the requirements of the gift in the first year and none in the second year. 
    At the end of the first year, your investment fund could not drop below $100. After the second gift was received, it could not go below $200 until more qualifying expenses were met. 
    Because of the possible complexity, most organizations do have a separate bank/investment fund for Restricted gifts. some even have a different account for each restricted gift. 
    Kirby Bowser

  • 4.  RE: Accounting for gift annuities

    Posted 30 days ago
    Thank you so much for the guidance. I really appreciate your insightful recommendations!!

    Sent from my iPhone