Which of the following statements about recognizing a conditional pledge under FASB is correct?

• A. It would recognize the conditional pledge immediately.
• B. It would recognize the conditional pledge when cash is received.
• C. It would recognize the conditional pledge when the donor confirms it.
• D. It would not recognize the conditional pledge until pledge conditions are substantially met.

Answer: (D)

Conditional pledges depend on a future, uncertain event outside the recipient’s control. Under FASB, revenue from these promises isn’t recognized until the conditions are substantially met, because the pledge isn’t unconditional yet. Once those conditions are substantially met, the organization can recognize the pledge as contribution revenue (and record a receivable with any applicable donor-imposed restrictions). That timing avoids overstating support, since recognizing the pledge before the condition is satisfied would not reflect a real, guaranteed inflow. Recognizing at the moment of cash receipt, or upon donor confirmation, would ignore the conditional nature of the promise and isn’t appropriate.