A Canadian charitable organization receives a restricted donation for use in a specific program. Under ASPE for Not-for-Profit Organizations (Section 4400), how should this donation typically be recognized if the organization uses the deferral method?

Question: A Canadian charitable organization receives a restricted donation for use in a specific program. Under ASPE for Not-for-Profit Organizations (Section 4400), how should this donation typically be recognized if the organization uses the deferral method?

Answer options:

• Recognized as revenue when received. ✅ Deferred and recognized as revenue when the related expenses are incurred.
• Recognized as deferred revenue and amortized over the asset's useful life.
• Recognized as a liability until the condition is met.

Correct answer: Deferred and recognized as revenue when the related expenses are incurred.

Explanation: Under the deferral method of accounting for restricted contributions (NFP Section 4410), restricted contributions are deferred and recognized as revenue in the period in which the related expenses are incurred. This ensures matching of revenue and expenses.