Net Assets With Donor Restrictions include sources of revenue which are restricted by the donor/grantor either in perpetuity (endowment), or restricted for specified purposes, or by the passage of time. This is basically revenue received ‘with strings attached.’ The nonprofit must comply with the donor/grantor imposed ‘strings’ for the use of the funds, or they can jeopardize future funding.
For example, when a donor makes a contribution to a nonprofit and designates what they want their donation used for, then it is classified as “revenue in the donor designated fund.” When the nonprofit uses the funds for the designated purpose, then the revenue is moved from “with donor designated fund” to the “without donor designated fund” to match the revenue with its intended expense. The Net assets represent the cumulative excess of deficiency of revenue minus expenses in the fund.