Unrestricted Net Assets

Unrestricted net assets are the portion of a nonprofit organization's net assets that are not restricted by donors or by law. These assets can be used by the organization for any purpose, including operating expenses, program expenses, or capital expenditures.

Unrestricted net assets are important because they provide a measure of the organization's financial health and stability. They also give donors and other stakeholders confidence that the organization is using its resources wisely.

There are a few different ways to calculate unrestricted net assets. One common method is to subtract all liabilities from all assets. Another method is to subtract all temporarily restricted net assets from all net assets.

The FASB Accounting Standards Codification defines unrestricted net assets as "the excess of assets over liabilities, except for those assets and liabilities that are either (a) required by donor-imposed restrictions to be held in perpetuity or (b) restricted by law to specific purposes."

The IRS defines unrestricted net assets as "the amount of net assets that are not required by law, contract, or donor restriction to be maintained or used for a particular purpose."

Regardless of the method used to calculate them, unrestricted net assets are an important indicator of a nonprofit organization's financial health and stability. They provide donors and other stakeholders with confidence that the organization is using its resources wisely.