Temporarily Restricted Net Assets

Temporarily Restricted Net Assets are funds received by a nonprofit organization that are subject to donor-imposed restrictions, which will expire either with the passage of time or when certain actions have been fulfilled. These assets cannot be used for general operations until the restrictions are met. Once the purpose or time restriction is satisfied, the assets are reclassified as unrestricted. This concept is crucial for proper fund accounting, ensuring that organizations honor donor intentions and comply with accounting standards. Examples include grants designated for a specific project or funds restricted for use in a particular year.