Under FASB standards, how would a not-for-profit organization recognize a conditional pledge?

• A. It would recognize the conditional pledge immediately.
• B. It would not recognize the conditional pledge until pledge conditions are substantially met.
• C. It would recognize the pledge when cash is received.
• D. It would recognize the unconditional portion of the pledge.

Answer: (B)

A conditional pledge is not treated as revenue until the donor’s conditions are substantially met. Under FASB guidance for not-for-profits, the promise remains contingent because the gift depends on future events outside the organization’s control. Only when those conditions are substantially satisfied does the pledge become unconditional and eligible to be recognized as revenue. If a pledge contains both unconditional and conditional elements, the unconditional portion is recognized when it is received, while the conditional portion waits until the condition is met. This is why the correct approach is to defer recognition until the conditions are substantially met.