Example 4: Remainder Trust (Period-certain-more-life-contingent, fixed payments) Common shares contribute to the control of the NFP organization, which is required to pay the donor or donor beneficiary a fixed annual cash payment for the remaining term of the beneficiary or a specified period. The remaining permissions are then reset to the NFP organization. During the duration of the agreement, the NFP organization has a responsibility to analyze for the application of Declaration 133 as being composed of two separate debts: a liability related to cash payments for exercise and a second liability related to possible additional cash payments depending on the beneficiary living beyond the end of payments beyond the year. The responsibility of the NFP organization does not require the diversion of incorporated derivatives, since the portion of liability related to fixed exercise payments has no basis and the portion of the liability related to any life-related payments is qualified for the exemption under paragraph 10, point c). Revocable inter-split interest agreements are only intentions to be given and should not be recognized as a contribution, unless they are legally enforceable. Contributions received by non-profit organizations under irrevocable split interest agreements should normally be valued when received. In October 2011, the AICPA Financial Reporting Executive Committee and the Not-Profit Entities Fair Value Task Force “Financial Reporting Whitepaper: Measurement of Fair Value for certain Transactions of Not-Profit Entities” were published under discussions of various measurement techniques for interstate splitting agreements. After the initial registration of irrevocable inter-state interest agreements, an organization must detect different transactions and events during the term of the contract. Where assets brought in under an irrevocable inter-institutional agreement are held or controlled by a third party, the organization should account for changes in the fair value of their economic interests using the same valuation technique it originally used to measure economic interests. However, where the organization is fiduciary, the assessment of liabilities is changed by: (a) amortization of the rebate put in place to account for fair value of benefits receivable and (b) reassessments of future payments to beneficiaries on the basis of changes in life expectancy and other actuarial assumptions, unless the valuation objective is fair value. Shared interest agreements are agreements where that donors enter into trusts or other agreements under which NFP organizations receive benefits shared with other beneficiaries. A typical split-interest agreement consists of two components, an interest in lead and a residual interest.
The main interest rate is the right to benefit (cash flow or use) of assets transferred during the term of the contract, which normally begins with the signing of the contract and ends either (1) after a certain number of years (safe) or (2) after the overspend of a particular event, or the death of the donor, or the death of the beneficiary of interest on lead (life quota).