F6 M3

Question 1

how is contribution revenue recognized for unconditional pledges?

Answer 1

based on the net realizable value of pledges receivable

Question 2

how are expenses classified?

Answer 2

as reductions of net assets without donor restrictions

Question 3

how is a promise to contribute classified?

Answer 3

as a donation with restrictions because it implies a time restriction until conditions or eligibility requirements have been satisfied

Question 4

patient service revenue

Answer 4

-recorded on accrual basis
-reported on gross basis net of deductions
-include central transactions like doctors, surgery, recovery room, and room and board

Question 5

charity care

Answer 5

-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

Question 6

patient service deductions examples

Answer 6

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

Question 7

difference between bad debt recognized as operating expense and one that reduces patient revenue?

Answer 7

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

Question 8

classification of scholarships for university

Answer 8

-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

Question 9

contribution revenue calc

Answer 9

total contribution received - fair value of premiums

Question 10

measurable performance-related barriers examples

Answer 10

1) specific outputs or outcomes
2) specified levels of service
3) matching requirements
4) outside events
5) contingencies

Question 11

what concept is contributed revenue for revenue recognition based on?

Answer 11

satisfying conditions

Question 12

how are conditional contributions accounted for?

Answer 12

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

Question 13

how are unconditional contributions accounted for?

Answer 13

recognized as revenue and then classified as either without or with donor restrictions

Question 14

do conditional promises or pledges receive accounting treatment?

Answer 14

No

Question 15

when are cash contributions and unconditional pledges recognized as contribution revenue?

Answer 15

in the year in which the cash or pledge is received

Question 16

are net assets released from restrictions contributions?

Answer 16

No, even though they represent an increase in net assets without donor restrictions on statement of activities

Question 17

what is an exchange transaction?

Answer 17

the NFP earns resources in exchange for a service performed

Question 18

what is a contribution?

Answer 18

an unconditional transfer of cash or assets to an owner, no exchange involved and voluntary, not an ownership investment

Question 19

when are donated services recognized?

Answer 19

1) create or enhance nonfinancial assets
OR
2) require specialized skills (SOME)
3) (specialized skills, otherwise needed, measured easily)

Question 20

how are net assets released from restrictions used for operations accounted for?

Answer 20

accounted for as revenue

Question 21

are donor restricted contributions accounted for as revenue in year received, even if restricted based on time?

Answer 21

Yes

Question 22

what is an unconditional promise to give (pledge)?

Answer 22

-contribution recorded at fair value when promise made
-can be written or verbal

Question 23

what is a conditional promise to give (pledge)?

Answer 23

-transaction dependent on future or uncertain event
-recognition does not occur until conditions are substantially met and promise becomes unconditional

Question 24

what are good faith deposits?

Answer 24

go along with conditional promises and treated as refundable advances in liability section of statement of financial position

Question 25

what are multi-year pledges?

Answer 25

-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

Question 26

does a right or return imply a condition to earning the money?

Answer 26

No because it is not a measure-related barrier

Question 27

allowance for uncollectible pledges

Answer 27

must be recorded to present pledge at its net realizable value

Question 28

how are donated supplies accounted for?

Answer 28

recorded at fair value and then recognized as expenses when used

Question 29

accounting for contributed assets?

Answer 29

the simultaneous receipt and use of assets would be recorded at fair value as a revenue and expense in period received

Question 30

how are special events representing an ongoing and major activity accounted for?

Answer 30

should fully display gross fundraising revenues and expenses and are not netted together

Question 31

revenues for educational programs examples

Answer 31

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

Question 32

how are revenues for tuition reported at?

Answer 32

reported at the gross amt and netted by any refunds