nonspendable

Nonspendable fund balance is a category used in governmental fund accounting to describe resources that are not in spendable form or are legally required to be maintained intact. It is part of the fund balance reported by governmental funds under the guidance of the Governmental Accounting Standards Board (GASB).

Examples include inventories held for sale or for use, prepaid items, and the principal of a permanent (endowment) fund. These resources cannot be spent until they are converted to a spendable form or until restrictions permit their use.

Nonspendable fund balance is reported in the nonspendable line of the fund balance section on the balance sheet. It is distinct from the spendable fund balance categories—restricted, committed, assigned, and unassigned—that represent amounts available for appropriation and expenditure. The presence of nonspendable balances indicates that a portion of the fund’s resources is not available for current operations. As inventories are consumed or prepaid items are recognized as expenses, or as legally required preservation conditions are satisfied, amounts may become spendable in future periods.

Together with the other fund balance categories, nonspendable balances help users assess the liquidity and long-term obligations of governmental funds. The concept aids in transparency about which resources are held in a form that cannot be immediately used for expenditures.