E-FAR-NotForProfit(Nongovernmental) Flashcards
FASB ASC 958 indicates that “a complete set of financial statements of not-for-profit organization shall include
1 statement of financial position as of the end of the reporting period,
2 a statement of activities and
3 a statement of cash flows for the reporting period, and
4 accompanying notes to financial statements.
FASB ASC 958 establishes standards for general-purpose external financial statements. This statement focuses on
the basic information of the organization as a whole so as to enhance the relevance, understandability, and comparability of the financial statements by the external users. Thus, the overall objective is the enhancement of the basic information.
a statement of financial position for a nongovernmental nonprofit entity should report net assets according to whether the net assets are:
unrestricted,
temporarily restricted, or
permanently restricted.
a statement of functional expenses is required for
voluntary health and welfare organizations. Other private nonprofit organizations are encouraged to disclose this information, but they are not required to do so.
A Statement of Activities reports revenues, expenses, gains, losses, and reclassifications. Resources are divided into three classes: unrestricted, temporarily restricted, and permanently restricted.
Separate revenues, expenses, gains, losses, and reclassifications for each class may or may not be reported, but the Change in net assets for each class must be reported.
Net assets under the control of the governing board of NFP are reported as
unrestricted net assets.
A contribution from a resource provider is reported as contribution revenue if
(1) the recipient organization is granted variance power by the resource provider OR
(2) the recipient organization and the beneficiary are financially interrelated organizations.
When a resource provider transfers assets to a nonprofit entity and (1) DOES NOT grant the recipient organization variance power and (2) the recipient organization and the beneficiaries are NOT financially interrelated, the recipient entity should record
an increase in assets and liabilities as a result of the donation.
Donations of services are recognized on the statement of activities if either of the following conditions are met:
(1) the services create or enhance a nonfinancial asset, OR (2) the services require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.
Functional classifications should be based functions.
on full cost allocations. Health care organizations may report depreciation, interest, and bad debts along with
Unrealized gains on investments which are permanently restricted as to use by donors are reported by a private, nonprofit hospital on the
Statement of changes in net assets
According to GASB 35, public colleges and universities that choose to report only business-type activities should present only the financial statements required
for enterprise funds.
The Statement of Activities has four principal sections:
1 Revenues and Gains,
2 Net Assets Released from Restrictions,
3 Expenses and Losses, and
4 Change in Net Assets
Net Assets Released from Restrictions reduces
and increases
Temporarily Restricted Net Assets
Unrestricted Net Assets
Exchange revenues (fees, dues, charges for services, etc.) can only be reported under
Unrestricted Net Assets by not-for-profit organizations.
The Statement of Activities is required for all organizations. The principal requirement of the statement is to
provide the Change in Net Assets
The structure of the Statement of Cash Flows for a not-for-profit organization is identical to that of a for-profit organization: debt proceeds are reported as , and purchases of capital assets are reported as
cash inflows under financing activities;
cash outflows under investing activities
Expenses for not-for-profit organizations fall into two broad categories:
(1) program services and
(2) supporting services. Expenses for program services are incurred because of the stated mission of the not-for-profit. All other expenses fall under the supporting services classification.
Changes in market value of investments are recognized
on the Statement of Activities as unrealized gains and losses during the period of the change
How should a nongovernmental not-for-profit organization report investments in debt securities?
Unlike for-profit entities, not-for-profit entities do not break debt securities into trading, available-for-sale, and held-to-maturity categories. Following FASB Statement No. 124, not-for-profits value debt securities at FAIR VALUE (quoted market price).
The entry to record professional donated service recognizes the fair market value of the service as
a credit to contribution revenue and as a debit to either an asset or an expense account
Promises that depend on a specific event occurring in the future should still be recognized as contributions as of the date of the gift T/F
False
NFP organizations sometimes receive resources that are restricted by the donor to specific recipients. These contributions may actually be liabilities of the NFP organization.
ASC 958-605-45 (Statement #136) addresses these recognition issues
What is included in total net assets in the statement of financial position for a nongovernmental not-for-profit organization
FASB Statement No. 117 requires three categories of net assets:
(1) unrestricted net assets,
(2) temporarily restricted net assets, and
(3) permanently restricted net assets
An unrestricted bequest is reported by a hospital as a
Non-Operating Gain
Net Patient Services Revenue is reported net of
the provision for bad debts
Medical supplies donated to a hospital are reported as
Other Operating Revenues
Hospital revenues are classified broadly into three major categories:
- Patient Service Revenues,
- Premium Fees, and
- Other Revenues.
Tuition revenues and instructional expenditures for an academic period encompassing two fiscal periods are
prorated to each fiscal year in accordance with the amount of service provided during each of the periods
