F6 - M1 - Non profit financial reporting Flashcards
What is without donor restrictions?
Donations where the non profit decides what to do with that money. These are contributions that the non profit can use on whatever they would like to help run the business.
What is with donor restrictions?
Money where the non profit has to use it in a certain way.
Support a certain activity - Like you can only use this for building renovations by the donor for example.
Investment for a specific term -
Use specified period - For example, you cannot use this until next year.
acquisition of long lived assets, etc. - You can only use the money to buy equipment.
Asset that are used for a specific purpose and cannot be sold
Donor-restricted endowments - These are assets donated to the non profit that must be invested, and the proceeds from the investment can be used for income. You cannot mess with the asset donation itself.
A board decision, is that a restriction or not?
Restriction means that an external party is restricting the asset, non internally. So board restriction is not a restricted net asset. These are called board designated funds.
What are program services for non profits?
The main services the non profit performs.
Are all expenses without donor restrictions?
Yes, except for investment expenses which are netted with investement income I believe.
What are the requirements for contributions for non profits?
Unconditional
Must be a transfer of cash and/or other assets
Title must pass
Must be voluntary
etc.
What are the different non-for-profit industries?
Health Care
Educational institutions
Voluntary health and welfare organizations - United way, red cross, etc.
Other - Cemetery organizations, fraternal organizations, professional organizations, labor unions, etc.
Where are the non profit financial reporting standards outlined? Who governs these?
The FASB, and the GASB for governments.
What are the three ways non profits can report the relationship between functional classifications and natural classifications?
On the face of the statement of activities
Schedule in the notes to the financial statements
In a separate financial statement
For non-profits, assets and liabilities are broken out between current and non-current, and assets are ranked on how close they are to generating cash. What are restricted and designated assets for non-current purposes restricted as?
Designated assets for non current purposes, such as purchasing some long-term assets, should be classified as non-current.
If the asset is restricted, that should also be classified as non-current.
Do non profits provide supplemental disclosures showing the breakout of of net assets with restrictions and net assets without restriction?
Yes, for restricted, they normally breakout where the total amount of restricted income comes from and how it adds up to restricted net assets.
For unrestricted, some places don’t do it and it’s fine, but some places like to note how unrestricted income is being designated by management or the board. That way they say , yeah we have 100,00 in unrestricted, but management designated 20,000 for another purpose for example.
Is there a specific way the statement of activities needs to be presented? Can they lead with expenses first and then revenue?
There is no specific way that it needs to be shown, and they can lead with expenses if they want.
Are revenues on the statement of activities broken out between restricted revenue and non restricted revenue?
Yes, so if you had fees from services, or contributions that have no explicit donor stipulation, or gains and losses from investments that are not accompanied with donor restrictions.
What are the steps for reclassification of restrictions?
Step 1 is when the contribution with donor restriction received. They are recognized in the period in which they are received and that increases net assets with donor restrictions.
Step 2 - When a donor restriction is satisfied, it is reclassified on the statement of activities.
It moves from restricted net assets to unrestricted net assets.
Now if a restricted donation is satisifed in the current period, they can skip reporting it as a restricted amount, and increase net assets without donor restrictions.
Permaninte restrictions are normally not reclassified because they never expire.
Are expenses normally classified as not donor restrictions?
Yes, except for some investment expenses which are netted with investment income.
