charles a. barragato
Long Island University, C.W. Post Campus
Abstract: This paper examines the controversial requirement that nonprofit organizations recognize unconditional promises to give as assets and revenues in the year promises are received in accordance with SFAS No. 116 - Accounting For Contributions Received and Contributions Made. The study adopts the view that information about promises to give is relevant if it useful in assessing probable future cash inflows. A model by Dechow, Kothari and Watts (1998) is modified to provide fundamental intuition about the relation between unconditional promises to give and future cash inflows. This model is then used to guide the study's empirical tests, which examine the assertion that recognizing unconditional promises to give as assets and as revenues in the period received improves predictions of future cash inflows. Results are consistent with this prediction and provide evidence consonant with the FASB's endorsement of an integrated conceptual framework that has relevance to all types of reporting entities.
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