Chapter 9 Section 2: Not-For-Profit Accounting

Question 1

What is the overall emphasis for NFP financial statements?

Answer 1

Basic information for the organization as a whole

Question 2

What are the required financial statements?

Answer 2

Statement of financial position
Statement of activities
Statement of cash flows
Statement of functional expenses (required for voluntary health and welfare organizations)

Question 3

What is the NFP version of equity?

Answer 3

Net assets

Question 4

What are the three classifications of net assets?

PUT

Answer 4

Permanently restricted
Unrestricted (includes board-designated restrictions)
Temporarily restricted

Question 5

Under what basis are NFP financials stated?

Answer 5

Full accrual

Question 6

What goes into the statement of activities?

Answer 6

Change in total net assets

Change in each of the PUT accounts

Question 7

How are expenses reported?

What are the categories?

Answer 7

As reductions in unrestricted net assets
Program services
Support services
Combined costs

Question 8

Outline the statement of activities

Answer 8

Revenue and gain
   Net assets from restrictions (reclassifications)
Expenses and loss
(program, then support, then combine)
Changes in net assets
Net assets at beginning
Net assets at end

Question 9

What method can be used for the statement of cash flows?

Answer 9

Either direct or indirect

Question 10

What are the classifications of expenses in the statement of functional expenses?

Answer 10

Program support
Fundraising
Management and general
Multiple cost items

Question 11

How are resource inflows categorized?

Explain the difference

Answer 11

They are either revenue or other support
Revenue is an exchange transaction
Other support is usually donated

Question 12

What are the different contributions and pledges, and when are they recognized?

Answer 12

Cash contributions - received = revenue (FV gift date)
Unconditional pledge - pledged = revenue (FV promise date)
Conditional pledge - earned = revenue
Multi-year pledge - PV of pledge, now = revenue, future = temp restricted revenue

Question 13

In multi-year pledges, what is the difference between PV and amount recorded attributed to?

Answer 13

Contribution revenue - not interest income

Question 14

How are split-interest agreements reported?

Answer 14

At fair value at acquisition date, and classified as temporarily restricted

Question 15

How do you record donated services?

SOME

Answer 15

At their fair value as contribution revenue and expense if:
Specialized skills
Otherwise needed
Measurable
Easily (at FV)

Question 16

What if you have a pledge, but aren’t confident that you’ll collect all of it?

Answer 16

Use an allowance for doubtful accounts

Question 17

Are unconditional pledges restricted or unrestricted?

Answer 17

Temporarily restricted (time)

Question 18

What do you do with restricted contributions?

Answer 18

Earn it when you spend it. Then remove the restriction.

Question 19

What does it mean to be with or without variance power

Answer 19

Without variance power means you are accepting assets from a donor and using them on behalf of someone else without any say in how they’re used. Treat like a liability
With variance power means you get to decide how they’re used. Treat it like a donation.

Question 20

What do you do when you’re the ultimate beneficiary?

Answer 20

Unless the recipient has variance power, recognize the rights to the asset.

Question 21

How are gains and losses reported?

Answer 21

In the statement of activities as increases or decreases in unresetricted net assets

Question 22

Define the three types of endowments

Answer 22

Permanent endowment: principal is not permitted to be spent (perm rest.)
Term endowment: must be held for a specified term (temp rest)
Quasi-endowment: internal governing board has determined that the funds should be spent a certain way. (unrest)

Question 23

What are the seven types of funds?

Are they reported externally?

Answer 23

Do not use funds for external reporting
Unrestricted current
Restricted current
Plant
Loan
Endowment
Annuit and life income
Agency

Question 24

For colleges, how do you report tuition and scholarships?

Answer 24

Report tuition at gross amount (minus cancelled classes)

Scholarships are expenses