F6 M3 Flashcards
NFP Revenue Recognition
how is contribution revenue recognized for unconditional pledges?
based on the net realizable value of pledges receivable
how are expenses classified?
as reductions of net assets without donor restrictions
how is a promise to contribute classified?
as a donation with restrictions because it implies a time restriction until conditions or eligibility requirements have been satisfied
patient service revenue
-recorded on accrual basis
-reported on gross basis net of deductions
-include central transactions like doctors, surgery, recovery room, and room and board
charity care
-health care services provided but not expected to result in revenue
-policy of charity care disclosed in F/S
-not recognized as receivable or revenue
-not recognized as bad debt expense
patient service deductions examples
1) contractual adjustments for third party payments
2) policy discounts
3) administrative adjustments
4) bad debts associated with services billed before assessing patient’s ability to pay
difference between bad debt recognized as operating expense and one that reduces patient revenue?
OE: bad debt from failure to collect revenues that healthcare thought would earn
DR: healthcare unable to collect and never assessed quality or collectability beforehand
classification of scholarships for university
-tuition fees treated as gross revenue even if funded by scholarships and considered net assets without donor restrictions because part of normal ongoing operations
-scholarships to students considered expenses and reduce net assets without donor restrictions
contribution revenue calc
total contribution received - fair value of premiums
measurable performance-related barriers examples
1) specific outputs or outcomes
2) specified levels of service
3) matching requirements
4) outside events
5) contingencies
what concept is contributed revenue for revenue recognition based on?
satisfying conditions
how are conditional contributions accounted for?
as a refundable advance, which is a liability on NFP’s books if do not meet eligibility requirements per donor stipulations and thus would need to return to donor
how are unconditional contributions accounted for?
recognized as revenue and then classified as either without or with donor restrictions
do conditional promises or pledges receive accounting treatment?
No
when are cash contributions and unconditional pledges recognized as contribution revenue?
in the year in which the cash or pledge is received
are net assets released from restrictions contributions?
No, even though they represent an increase in net assets without donor restrictions on statement of activities
what is an exchange transaction?
the NFP earns resources in exchange for a service performed
what is a contribution?
an unconditional transfer of cash or assets to an owner, no exchange involved and voluntary, not an ownership investment
when are donated services recognized?
1) create or enhance nonfinancial assets
OR
2) require specialized skills (SOME)
3) (specialized skills, otherwise needed, measured easily)
how are net assets released from restrictions used for operations accounted for?
accounted for as revenue
are donor restricted contributions accounted for as revenue in year received, even if restricted based on time?
Yes
what is an unconditional promise to give (pledge)?
-contribution recorded at fair value when promise made
-can be written or verbal
what is a conditional promise to give (pledge)?
-transaction dependent on future or uncertain event
-recognition does not occur until conditions are substantially met and promise becomes unconditional
what are good faith deposits?
go along with conditional promises and treated as refundable advances in liability section of statement of financial position
what are multi-year pledges?
-recorded at net present value at date pledge is made
-future collections considered donor-restricted revenues and net assets (time-restricted)
-previous PV of pledge - current amt recognized as contribution revenue
does a right or return imply a condition to earning the money?
No because it is not a measure-related barrier
allowance for uncollectible pledges
must be recorded to present pledge at its net realizable value
how are donated supplies accounted for?
recorded at fair value and then recognized as expenses when used
accounting for contributed assets?
the simultaneous receipt and use of assets would be recorded at fair value as a revenue and expense in period received
how are special events representing an ongoing and major activity accounted for?
should fully display gross fundraising revenues and expenses and are not netted together
revenues for educational programs examples
1) student tuition and fees
2) government aids, grants, and contracts
3) gifts and private grants
4) endowment income
5) sales and services of educational departments, such as publications and testing services
6) food service
7) residence halls
8) campus store
9) athletics
how are revenues for tuition reported at?
reported at the gross amt and netted by any refunds
