Final answer:
FASB standards indeed require that contributions with donor restrictions are classified as temporarily or permanently restricted and necessitate a reclassification once the funds are expended, applying to private nonprofit organizations.
Step-by-step explanation:
The statement that FASB standards recognize contributions with donor restrictions as temporarily or permanently restricted upon receipt of an unconditional pledge is true. Indeed, such contributions are reported as either temporarily or permanently restricted support, according to the nature of the restrictions outlined by the donor.
When a nonprofit organization receives a donation, it must classify the funds based on the donor's intent. If there are stipulations on how and when to use the funds, these are categorized as donor-restricted contributions.
Once the funds are spent in accordance with the donor's restrictions, a reclassification entry is made to remove the restriction and reclassify the funds as having been used for their intended purpose.
This is generally relevant to private-sector nonprofit organizations which follow FASB (Financial Accounting Standards Board) accounting standards.