Special Event Revenue

Posted on Wednesday, October 04, 2017

Nonprofit organizations normally hold some type of special event during the year to raise funds for their organization.  It may be a dinner and an auction or a golf outing.  No matter the type of event, there are likely different types of revenue received.  Is your organization recording these correctly?

The most common type of revenue source related to a special event is a sponsorship.  A sponsorship is received from a corporation, foundation, or other entity that is generally accompanied by an acknowledgement that the entity has supported the nonprofit’s event.  Sponsorships are considered contributions if the sponsor receives no value in exchange for the payment or the value received is incidental to the potential public benefit to be provided.  Recognition of the donor’s name as a sponsor is considered incidental. 

If the sponsor receives a benefit in exchange for the payment, a portion or all of the sponsorship represents an exchange transaction.  In the case of a special event with a dinner, a sponsorship usually includes a contribution portion and an exchange transaction.  A sponsor may receive a certain number of tickets to attend the dinner in exchange for their sponsorship payment.  The exchange transaction portion is measured at the fair value of the direct donor benefits, and the excess of the ticket price over the fair value of the direct donor benefits is the contribution portion.  For example, Company ABC makes a $5,000 sponsorship payment to your organization’s upcoming dinner and auction event.  Being a sponsor at the $5,000 level allows Company ABC to receive 8 tickets to the dinner.  Each dinner is valued at $25.  The exchange portion of the receipt is $200 (8 tickets x $25) and the contribution portion is $4,800. 

In some circumstances, the event is scheduled to take place after year end (after the financial statement date).  When this occurs, the revenue from the exchange transaction portion is deferred until the event takes place and the goods and services are transferred to the ticket holder.  The contribution portion is presumed to be conditional on the event taking place and should be recorded as a refundable advance until the conditions have been substantially met.  However, a conditional gift is considered unconditional if the possibility that the condition will not be met is remote.  An unconditional gift should be recorded as a temporarily restricted contribution when received and the event does not take place until the following year.  In determining whether the likelihood of the condition is remote, some items to consider are as follows.

If the answers to these are yes, the possibility of not having the event is remote and the contribution should be recorded as a temporarily restricted contribution as opposed to a refundable advance.

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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