Question

A donor gave equipment valued at $60,000 at the beginning of 2017 to a private not-for-profit organization. The equipment had a 10-year life and depreciation of $6,000 was charged during 2017. At the end of the year, the net assets to be reported in unrestricted net assets related to this equipment would be?

Answer 1

Usually the nonprofit organization should report the value of the donated asset as the difference between the price when donated minus depreciation: $60,000 - $6,000 = $54,000.

But nonprofit organization can choose to recognize only a part of the donation each year as long as they use the asset. This recognized part is usually equivalent to the depreciation cost, so the value of the asset at the end of the year will always be 0. They do this to show smaller balances in order to try to attract more donations. It is always harder for wealthy nonprofit organizations to get more donations, so be having 0 assets donated, they pretend to be "poorer".