F6-NFP Financial Reporting

Question 1

NFP reporting guidance included in FASB ASC 958 primarily focuses on

Answer 1

basic information for the organization as a whole.

Question 2

Classifications is required for reporting of expenses by all not-for-profit organizations :

Answer 2

• By their functional classification:
  program services (expenses directly related to the mission of the NFP), management and general (administrative expenses), and fundraising and other supporting services
• by their natural classification:
  such as such as salaries, rent, utilities, supplies, etc.

Question 3

The three functional classifications for expenses incurred by a not-for-profit organization are:

Answer 3

• program services,
• management and general costs, and
• fundraising and other supporting services

Question 4

The primary purpose and focus of the statement of activities for a nongovernmental, not-for-profit organization is…

Answer 4

to show how the organization’s resources are used in providing various programs and services.

Question 5

What is the purpose of a statement of financial position for a nongovernmental not-for-profit entity?

Answer 5

Providing relevant information about assets, liabilities and equity (net assets) and their relationship to one another at a moment in time

Question 6

The classification of net assets on the statement of financial position for a not-for-profit organization are:

Answer 6

“Net Assets Without Donor Restrictions” and “Net Assets With Donor

Question 7

Three required elements in the statement activities for NFP organizations:

Answer 7

Change in net assets without donor restrictions.

Change in net assets with donor restrictions.

Change in total net assets.

Question 8

Expenses are reported as decreases in net assets…

Answer 8

without donor restrictions.

Question 9

under indirect method, a nongovernmental, not-for-profit organization will be report interest as…

Answer 9

a supplemental disclosure.

Question 10

Under the indirect method, depreciation is…

Answer 10

added back to the change in net assets because it represents a noncash expense.

Question 11

Under the indirect method, a decrease in accounts payable implies that cash payments were made…

Answer 11

to vendors (cash outflow) and subtracted from the change in net assets

Question 12

Examples of Investing activities of the statement of cash flows:

Answer 12

Cash inflows: Sale of investments, sale of PPE, receipts from maturities of investments, interest income and dividends received, and proceeds from insurance recoveries of lost or destroyed collection items, proceeds from the sale of works of art.

Cash outflows: Purchase of investments (stocks, bonds, or mutual funds), Capital expenditures (purchasing PPE for long-term use), loans made to others, and cash spent on construction projects or significant improvements to existing facilities, and purchases of works of art.

Question 13

Examples of financing activities of the statement of cash flows:

Answer 13

Cash inflows: Receipts from long term loans, contributions restricted for long-term purposes (endowments, building funds, or major projects), Proceeds from Issuance of Bonds or Similar Debt Instruments, and Endowment Contributions.

Cash outflows: Repayments of Long-Term Debt (to reduce the principal amount of long-term debts, such as loans or bonds), and finance lease agreements.

Question 14

Rule: Donor-imposed restrictions that are met in the same period they are received may be recorded as…

Answer 14

support (contribution revenue) without donor restrictions, provided that the organization discloses and consistently applies this accounting policy.