Pledges may also involve non-cash contributions, such as a pledge to donate artwork at the end of next year. By showing Pledges Receivable on the Balance Sheet, a nonprofit organization shows the amount of money it can reasonably expect to receive in the future in pledged contributions. In the past, organizations have had some leeway in the timing of recognizing pledges as income. A pledge must be bona fide to be recorded in the accounting system. Some indicators that a pledge is valid include written evidence created by the donor using words such as promise, agree, or binding, or whether the pledge appears to be legally enforceable.
Pledges are either conditional or unconditional.
An unconditional pledge is a promise by a donor to give a gift to the nonprofit in the future. The nonprofit does not need to meet any specific requirements before receiving the gift, and there are no other conditions stipulated by the donor. The examples at the beginning of this article illustrate unconditional pledges. Statement 116 asserts that unconditional pledges must be recorded in the financial record when they are made. A conditional pledge is contingent on the occurrence of an uncertain future event.