General structure of a lead trust for an NFP organization: assets such as cash or shares are brought by the donor to control of the NFP organization (either by the role of the NFP organization as a trustee of a trust holding the assets, or directly by the organization NFP, which holds the assets as the general heritage of its organization). The NFP organization receives periodic cash payments (Lead interest) which are either a fixed dollar amount or a certain percentage of the fair value of assets at the beginning of each period. (Note: some of the assets can be liquidated to make the necessary payments.) If the contract is terminated, the remaining assets are reset to the donor`s donor or beneficiary (the rest of the interest). For the duration of the agreement, the NFP organization is responsible for the remaining interests. The responsibility of the NFP organization for its obligation to the donor`s donor or beneficiary is based in part on the fair value of the assets. There are two fundamental types of interest agreements: revocable and irrevocable. In addition, they may take the form of the following gift agreements: According to the standard, a government that receives funds under an irrevocable splitting interest agreement is required to account for assets, liabilities and deferred resource inflows at the beginning of the agreement. Example 6: Lead Trust (firm or variable payments) An NFP organization receives money from a donor invested in joint actions by the NFP organization. The donor designates the organization as the main beneficiary. At the beginning of each annual period, the PFNP organization receives, for a specified period, an annual cash payment equal to a fixed amount or a certain percentage of the fair value of the amount of the investment. The remaining assets will then be repaid to the donor or the donor`s beneficiary. For the duration of the agreement, the NFP organization has a responsibility that must be bifurcated. Under paragraph 12, liabilities are a hybrid instrument, consisting of a host debt contract and an incorporated equity derivative, which is not clearly and closely linked to the debtor and which corresponds to the definition of a derivative instrument if it were independent.
That is, it has an underlying (share price) and a nominal amount (number of shares at the beginning of each year), that it meets the net non- or smaller investment characteristic in paragraph 6, point b), and that it would fulfill the incomparization feature in paragraph 6, paragraph c).