Temporary restriction definition
/What is a Temporary Restriction?
A temporary restriction is a stipulation attached to a donation that controls its use for a certain period of time. These restrictions tend to be associated only with larger donations; nonprofits try to steer donors away from requiring such restrictions, since they can require a moderate amount of time to monitor, to ensure that the donor’s wishes are followed.
Examples of Temporary Restrictions
As an example of a temporary restriction, a donor stipulates that only the interest on a $10,000 donation can be spent during the first year, after which the entire amount can be spent. As another example, a donor contributes $1 million to a university’s vaccine development program, but only for the first year; after that period is over, any remaining funds can be assigned as the university chooses.
Accounting for a Temporary Restriction
When a nonprofit receives a donation that has a temporary restriction, it is recorded as an asset and as temporarily restricted contribution revenue.
