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FAR EXAM > F6 - NFP and Governmental Accounting > Flashcards

F6 - NFP and Governmental Accounting Flashcards

1
Q

F6M1

A
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2
Q

What are NFP characteristics?

A
  1. revenue comes from contributions
  2. operating purpose does not include profit even though they do generate it
  3. ownership interests are unlike business enterprises
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3
Q

What are some industries that use NFP accounting?

A

HEVO

Healthcare organizations
Educational institutions
Voluntary Healthcare and Welfare Organizations

and other private non governmental nfp orgs like museum, arts, library, professional orgs

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4
Q

What are the three external financial reports that NFPs must report?

A

stmt of financial position
stmt of activities
stmt of cashflows

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5
Q

What does the stmt of financial positions for NFP tell?

A

tells users the amt and nature of the company’s assets, liabilities, net assets with and without donor restrictions

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6
Q

What does the stmt of activities for NFPs tell?

A

equivalent to income stmt and stmt of changes in equity

tells us the services efforts of the orgs,

tells us the effects of events and circumstances that change that the nature of net assets,

tells us amt and kinds of inflows and outflows of economic resources occurring within a period and the relationship btw inflows and outflows with/without donor restrictions

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7
Q

What does the stmt of cashflows for NFPs tell us?

A

tells us how the org obtains and spends cash

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8
Q

What are with donor restrictions for NFP?

A

They are contributions with temp or perm restrictions, restricted to specific program

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9
Q

What are without donor restrictions for NFP?

A

Unrestricted contributions or reclassified funds once restrictions are met

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10
Q

What needs to be reported on the face of the stmt of activities as a sch on notes to the financial stmts or in separate financial stmt with no specific title for the NFPs?

A

information about the relationship btw functional classifications of expenses

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11
Q

Functional Classifications

A

categorizes costs by major classes of program and support services

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12
Q

Program services

A

purpose/mission of NFP, direct and indirect

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13
Q

Support services

A

mgt, general, fundraising

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14
Q

Natural Classifications

A

categorized by account title, salaries, rent, utilities

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15
Q

What are fundraising expenses for NFP?

A

costs incurred to induce contributions, classified as supporting activities

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16
Q

Depreciation for NFP?

A

included as element of expense in the smt of activities.

grants to other orgs and depr are recorded as expenses

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17
Q

Governed by FASB ASC 958 focuses on

A

focuses on general-purpose external financial stmts for the org as a whole, emphasizes relevance, reliability, and consistency in reporting

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18
Q

F6M2

A
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19
Q

Is the standards for preparing a statement of cash flows for a nongovernmental not-for-profit organization identical to the standards for a commercial entity?

A

Yes

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20
Q

What does the statement of cash flows report?

A

the cash receipts and cash payments during a period. It classifies these cash flows into three categories: operating activities, investing activities, and financing activities.

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21
Q

Operating Activities for NFPs?

A

Cash contributions without donor restrictions that are reported as an increase in operating activities (core mission)

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22
Q

Examples of operating activities include:

A

grants paid reported as disbursements,
cash collected on contributions receivable,
cash paid to employees and suppliers,
cash received from service recipients,
internet paid shown as a supplemental disclosure,
depreciations that is added back,
settlement of a lawsuit, insurance settlements, refunds from supplies, activity by major class of gross receipts, sale of financial assets

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23
Q

Examples Investing Activities for NFPs?

A

Investing report cash inflows and outflows related to investments in or proceeds from long-term assets

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24
Q

Examples of Investing Activities for NFPs

A

proceeds from sale of investments,

purchase of PPE

cash flows form purchases, sales, and insurance recoveries of unrecognized, noncapitalized collection items,

proceeds from sale of art

insurance proceeds associated with the loss of long-lived assets

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25
Financing Activities for NFPs examples?
cash contributions with donor restrictions cash received with donor-imposed restrictions borrowing cash proceeds from long-term debt payments on long-term debt
26
cash contributions with donor restrictions for long-term purposes are considered investing, financing, or operating activity?
financing activities
27
Purchase of investments or acquisitions of other companies are considered operating, investing, or financing?
investing activities
28
cash contributions without donor restrictions are considered operating, investing, or financiing?
operating activities
29
A cashflow stmt can be prepared using either
Direct Method: lists specific cash inflows and outflows Indirect Method: Adjusts changes in the net assets by reconciling noncash
30
What happens to depreciation when using the indirect method in stmt of cashflows for NFPs?
depreciation is added back to the change in net assets because it is a non cash expense
31
What happens to cash payments for interest when using the indirect method in stmt of cashflows for NFPs?
they are not presented as a separate line item but disclosed supplmentally
32
If an organization does not capitalize its collections, for NFP...
the cash flows from the purchase, sale or insurance recovery should be reported as investing activities, and any proceeds should be reported separately from revenues, expenses, gains and losses on the statement of activities
33
Capital financing activities is a classification used
in the statement of cash flows prepared for a proprietary fund of a government, not for not-for-profit organizations
34
F6M3
35
A donor restriction may be...
time specific
36
Contributions of services are recognized only if all criteria are met:
1. specialized skills are required and possessed by the donor 2. specialised skills are otherwise needed by the organization 3. contribution measurable and can be valued at FV
37
Equation for Net Patient Service Revenue
1. Gross Patient Service Revenue 2. Less; Charity care (not expected to result in cashflows; not recog as revenue) 3. Less: contractual adjustment = Total Net Patient Service Rev
38
credit loss provisions are treated as
operating expense
39
JE How are promises to give journalized considering some might not be collected?
DR:Pledge Receivable CR:Allowance for Doubtful accounts CR:Contribution Revenue
40
JE What is the JE for when a restricted donation used under its condition?
Donor Restricted Net Assets Non-Restricted Net Assets
41
What is the amt recognized is a donor gives $ and receives gift as thank you?
The difference btw the FV of the items
42
If profit is part of core operations it is considered ? If it's incidental?
recognized as revenue recognized as gains
43
cash contributions and unconditional pledges are recognized when?
in the year received
44
what are conditional promises:
good faith deposits recrded as "refundable advance" (liability). Recognized as revenue only after conditions are satisfied
45
Pledges
Allowance for uncollectible pledges ensures receivables are at net realizable value. Pledges collected over multiple years are recorded at present value
46
Revenue Classifications for nfps?
Hospitals: main classifications: patient services revenue, other operating revenue (educational) non-operating revenue (unrestricted gifts) Tuition: reported gross, scholarships and tuition remissions shown as expenditures; refunds reduce tuition cafeteria revenue is classified as other revenue
47
special events major events
like annual fundraising campaigns) report gross fundraising revenues and expenses incidental events may be presented on a net basis
48
gifts in kind
fv at donation date is reported, utilities; recognized as both revenue and expense donated services: recognized as revenue and expense at fv it creases/enhances a non-financial asset or requires specialized skills
49
Miscellaneous NFPs
foundation grants: recognized based on donor restrictions / conditions performance conditions: revenue recognized when measurable performance is achieved difference btw FV and amt contributed : classified as contr revenue
50
F6M4
51
Beneficiaries with financial interest in recipient organizations
Beneficiaries adjust their interest in the net assets of the recipient org in their stmt of activities JE Interest in Net assets Change in interest in Net Assets of Recipient Organization
52
Debt securities and equity securities with readily determinable FV are measured
at FV in the stmt of financial position
53
Investment income (div, int) are reported when...
in the period earned as an increase in net assets
54
FV of gains and losses: are reported where
in the stmt of activities as increases or decreases in net assets without donor restrictions, unless donor stipulations or law specify otherwise
55
Year end valuation
tota investments reported in the stmt of financial position are valued at FV
56
Donated shares of stock are measured
measured at FV on the date of donation
57
Accounting for Donated Items
Donated Items are valued at FV upon receipt. Securities are marked to market and at FV at the balance sheet date
58
Passthrough contributions
If a NFP org receives funds pledged to another org it's recog as increase in assets and increase in deferred revenue. recipients w/o variance power (no latitude in using the funds) recognized the received assets as a liability
59
Interrelated NFP org Orgs are considered financially interrelated if:
1. One org can influence the operating and financial decisions of the other 2. There is an ongoing economic interest in the net assets of the other
60
Accrual accounting for fixed assets
Nongovernmental NFP use the accrual method of ACC. Fixed assets are recorded as an asset and depreciated overtime
61
F6M5
62
What is the purpose of Fund Accounting?
To make sure activities are compliant with spending purposes. It's a system used by service and mission-driven organizations (like govs) to track and report resources for specific activities. It ensures compliance with legal restriction and spending limits by tracking budget adherence and financial control, fiscal accounting with external reporting and also used for internal accounting and resource management.
63
What is the fund? And its characteristics?
Fund: A fiscal and accounting entity with a self-balancing set of accounts that records financial resources, liabilities, and changes in equity. They are segregated to achieve specific objectives. The number and types of funds used are determined by the city accountant based on legal requirements and the need for financial administration.
64
What are the 3 generic types of fund categories and meanings?
Governmental Funds: for general gov ops ( public safety and educations) Proprietary Funds: business-like activities (fees for services). resources belong to the gov Fiduciary Funds: hold resources for others ( trustee roles). resources belong to 3rd parties
65
What determines the measurement focus and basis of accounting for gov funds operating statements?
Governmental accounting standards board (GASB)
66
Who are the users of gov financial reports?
citizens: gen public, TPs, advocacy groups legislative/oversight bodies: gov oversight committees, auditors, and regulators investors /creditors: bondholders, financial institutions,and other lenders
67
Characteristics of info in Gov financial reports
U R MICE Understandability Reliability Make a difference (relevancy) In timeliness Consistency year over year Equity-to-equity comparability
68
The most common functional classifications for nongovernmental not-for-profits are
program services, fund-raising and management and general.
69
F6M6
70
A governmental entity
although a single entity, consists a # of separate funds
71
Fund Categories
Governmental funds Proprietary Funds Fiduciary Funds
72
Governmental funds are accounted for using
modified accrual basis of accounting current financial resources measurementfocus
73
Modified accrual Basis of Acc + Current Financial Resources Measurement Focus
Gov Funds The focus is budgetary, balnce of current financial resources or its flow. The focus is on the difference btw net assets /liabs not bal sheet. Recognizes revenue when available . Uses both " accrued and modified accried"
74
Gov Fund Types:
GRaSPP General Funds: for ordinary operations special Revenue Funds: for revenue restricted for activities for gov debt Service Funds: for general obligation debt capital Projects Funds: for restricted construction of cap assets by gov enut Permanent funds for restricted for gov programs benefit of public
75
Economic Resources Management Focus and Full Accrual Basis of Accounting
Proprietary Funds Cap maintenance, and measurement of cashflows. Service (internal fund) : for goods/ services from one department to another/agency Enterprise Fund: for acq and op of gov facilities that are intended for 50%> self-supported by user changes
76
Enterprise funds are required when 1 of 3 criteria are met:
1 Activitty of fund is financied by debt secured by pledge of fee revenue 2. Laws require collection fees adequate to recover costs; or 3. Pricing policies are established to produce fees to recover costs
77
Economic Resources Management Focus and Full Accrual Basis of Accounting
Economic Resources Management Focus and Full Accrual Basis of Accounting Fiduciary Funds Custodial fund: for resources in temp custody of gov unit Investment Trust Funds: activities for investment pools Private purpose trust funds: activities for not accounted properly like pension or invest, in which asset dedicated to providing benefits to recipients Pension (and Other Employee) benefit trust fund: defined benefit plan

FAR EXAM (7 decks)

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