Part III. Analysis of Changes in Net Assets or Fund Balances

Generally, the excess of revenue over expenses, or vice versa, accounts for the difference between the net assets at the beginning and end of the year.

On Part III, line 2, re-enter the figure from Part I, line 27(a), column (a).

On lines 3 and 5, list any changes in net assets that weren't caused by the receipts or expenses shown in Part I, column (a). For example, if a foundation follows FASB ASC 958 (formerly “SFAS 115”) (ASC 320-10-35) and shows an asset in the ending balance sheet at a higher value than in the beginning balance sheet because of an increased market value (after a larger decrease in a prior year), include the increase in Part III, line 3.

If the organization uses a stepped-up basis to determine gains on sales of assets included in Part I, column (a), then include the amount of step-up in basis in Part III. If you entered a contribution, gift, or grant of property valued at fair market value in Part I, line 25, column (a), the difference between fair market value and book value should be shown in the books of account and as a net asset adjustment in Part III.