chapter 14

Question 1

Who provides guidance on generally accepted accounting principles for NFP:

Answer 1

FASB

Question 2

Stakeholders that use NFP’s financial statements

Answer 2

donors, grantors, members, lenders, consumers and others who provide resources to NFPs.

Question 3

NFP’s are required to

Answer 3

1. have a statement of financial position
2. statement of activities
3. statement of cash flows

Question 4

what are the two classes of nets assets for NFP’s ?

Answer 4

1. Net assets w/o donor restriction

2. Net assets w/ donor restrictons

Question 5

Net assets w/o donor restrictions

Answer 5

contributions from which no donor restriction exists or the restrictions have expired, revenues from services provided, and investment income.

Question 6

Board designated net assets

Answer 6

are net assets w/o donor restrictions appropriated or set aside for specific purposes by the governing board rather than an external donor.

Question 7

Net assets w/donor restrictions

Answer 7

donor imposes restrictions that may be either temporary or permanent.

Question 8

endowments

Answer 8

net assets with donor restrictions that are permanent in nature and nonexpendable

Question 9

board designated endowment

Answer 9

funds set aside by the board, however since they can reverse the decision it is classified as net assets w/o donor restriction.

Question 10

Underwater endowment

Answer 10

is a donor restricted endowment whose fair value has fallen below the amount required to be maintained for a fixed term or in perpetuity.

Question 11

Contribution

Answer 11

a voluntary, unconditional and nonreciprocal transfer of cash or other assets to an NFP by an entity external to the NFP.

Question 12

Promise to give

Answer 12

pledges can be conditional or nonconditional.

Question 13

acquisition

Answer 13

a transaction or other event in which a nfp acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer’s financial statements.

Question 14

Collections

Answer 14

works of art, historical treasures

Question 15

conditional promise to give

Answer 15

a promise to make a contribution to an organization that depends on the occurrence of a specified future and uncertain event to bind the promisor, such as obtaining matching gifts by the receipt

Question 16

federated fund raising organization

Answer 16

an organization composed of independent charitable organizations that have voluntarily joined together to raise and distribute money among themselves.

Question 17

gains

Answer 17

increase in net position from peripheral or incidental transactions of an entity.

Question 18

merger

Answer 18

a transaction or event in which the governing boards of two or more NFP entities cede control of those entities to create a new NFP entitiy

Question 19

revenue

Answer 19

inflow of economic resources resulting from the delivery of services or activities that constitute the organizations major or central operations rather than from the interfund transfers

Question 20

support

Answer 20

increase in net assets arising from contributions or resources or nonexchange transactions and includes only amounts for which the donor receives no direct tangible benefits from the recipient agency.

Question 21

variance power

Answer 21

redirecting donated assets to a beneficiary different from the third party initially indicated by the donor.

Question 22

intermediary

Answer 22

a recipient entity that acts as a facilitator for the transfer of assets between a potential donor and a potential beneficiary but is neither an agent or trustee nor a donee and donor.

Question 23

Functional expenses

Answer 23

are those that relate to either the program or mission of the organization (program expenses) or the management and general and fund raising expenses required to support the programs (support expenses)

Question 24

Examples of NFP Disclosures

Answer 24

1. those relating to financial instruments
2. Commitments
3. Contingencies
4. Prior Period adjustments
5. Changes in accounting principles
6. Employee Benefits

Question 25

Exchange Transactions

Answer 25

a transaction in which each party receives tangible benefits commensurate with resources provided; for example sales between a buyer and a seller.

Question 26

T/F A government grant is usually considered:

Answer 26

Support