Accounting for Multi-Year Pledges (with journal entries)

SFAS 116 (ASC 958)   established accounting standards for contributions received and made. Promises to give (i.e. pledges) spanning over multiple years will result in future cash flows that should be discounted from net realizable value to present value using an appropriate discount rate.  In addition, SFAS 117 (ASC 958)requires that the statement of financial position report net assets based on the existence of donor-imposed restrictions.  Total net assets are categorized as unrestricted, temporarily restricted and permanently restricted. (the new FASB Not-for-Profit Standard will change Unrestricted net assets to “net assets without donor restrictions” and temporarily and permanently restricted net assets to “net assets with donor restrictions”)

Below are sample Journal Entries assuming a simplified case of a multi-year $1,000,0000 unconditional pledge was made in 2017 (Year 0), with $200,000 payments per year, the first payment made in 2018 (Year 1).  Also using an estimated total discount of $50,000 ($10,000 per year).