Which statement reflects the timing of recognizing conditional pledges under FASB?

• A. Recognize immediately upon pledge.
• B. Recognize when cash is received.
• C. Recognize when pledge conditions are substantially met.
• D. Never recognize conditional pledges.

Answer: (C)

Conditional pledges are promises to give that depend on a future event. Under FASB, you don’t book these as revenue when the pledge is made or when cash arrives; you wait until the condition is substantially met. That means the pledge becomes effectively unconditional and can be recognized as contribution revenue (with any donor-imposed restrictions releasing when appropriate) only when the condition is close to being fulfilled and highly likely to occur. If the condition isn’t yet met, the pledge isn’t revenue and may be shown as a liability or a refundable advance until the condition is substantially satisfied. This is why the timing is recognized when the pledge conditions are substantially met.