F8 (NFP Acct+Revenue Recognition)

Question 1

3 main differences of NFP’s compared to commercial entities:

Answer 1

• contributions revenue; providers do not expect commensurate/proportionate return
• operating purposes is to provide services/mission of the NFP
• absence of ownership interest (no equity)

Question 2

basic FS’s for NFPs:

Answer 2

-statement of fin pos (BS)
-statement of activities (IS)
-statement of CFs
[notes are included]

Question 3

NFP’s are required to disclose functional expenses to present program and support categories to analyze expenses by object (natural class’n):

Answer 3

• program svc:
• activities the org is chartered
• universities (edu and research)
• hospitals (patient care and training)
• union (labor negotiations and training)
• day care (child care)
• support services:
• fundraising (cost to maintain a donor list for contributions)
• mgt. and G+A exp (soliciting membership dues)
• membership dvp (soliciting prospective members, brochure costs)

Question 4

classification of gov expenditures:

Answer 4

• function/program = elderly, drug, addiction, edu programs
• org unit = police, fire dept, (public safety functions)
• activity = drug and highway (under police org unit)
• character = current expend, cap outlay, debt svc, intergov
• object classes = chart of accounts (S+G exp, etc)

Question 5

acquisition of a plant in NFP Acct:

Answer 5

donated assets are class’d as NAs w/ donor restrictions to purchase/build LT-A

Question 6

NFP CFs:

Answer 6

either direct/indirect can be used

• CFO includes agency transactions
• includes receipts of resources w/o donor restrictions designated by gov body to be used for LT-A
• CFI includes proceeds from sale of works of art/purch of works of art
• includes investment in Equip
• includes proceeds from sale of assets rec’d in PRIOR PERIODS whose sale proceeds were donor-restricted to investment in Equip (or other LT-A)

*CFF includes:
proceeds from donor-restricted contributions
*inflow = CFF, outflow = CFI (disbursements)

-limits its use to purchases of LT-A or annuity agreements

Question 7

recording of gifts or promises to give:

Answer 7

• conditional promises are NOT recorded

* conditional gifts received in advance = refundable advance (L)

Question 8

multiyear pledge recording: [uncond’l promises receivable over a period of years]

Answer 8

record at PV + increase NA w/ donor restriction

Question 9

agency transactions:

Answer 9

-NFP has no discretion or “variance power”; creates a liability

Question 10

gifts-in-kind:

Answer 10

-noncash contributions recorded as both expense and support

Question 11

exchange transaction recording:

Answer 11

record as revenues w/o donor restrictions (sale of G/S)

Question 12

donations w/ donor restrictions that will be satisfied within 1 year of receipt:

Answer 12

classify as donations w/o donor restrictions

Question 13

split-interest agreements:

Answer 13

(charitable remainder trusts)
*displayed sep’ly on NFP FS, measured at FV or PV at acquisition and classified as donor-restricted; JE:

Dr Assets held in trust (donated amt)
Cr Liability to Ben (PV L)
Cr Contr Rev (w/ donor restriction) (plug)

**disbursements w/ split-int agreements are class’d as CFF on CFs

Question 14

SOME criteria:

Answer 14

contributions of services that require:

• Specialized skills
• Otherwise needed
• Measured
• Easily

Dr Exp/Asset
Cr Contributions (nonop rev)

Question 15

contributed services either:

Answer 15

• enhance a physical asset or

- meet SOME criteria

Question 16

Accounting for Mkt Sec’s:

Answer 16

investments in sec’s displayed at FV

-inc/dec in FV of sec’s are class’d as w/o donor restrictions unless there are donor stipulations

Question 17

underwater endowments:

Answer 17

FV reporting date
(-) OG gift amt
OR
(-) amt req’d to be maintained by donor/law

= NA w/ donor restrictions (loss)

Question 18

pass-through contributions to NFP Beneficiary:

Answer 18

Donor –> Recipient –> Beneficiary

Question 19

GR: recipient accounting (foundation)

Answer 19

*w/o variance power:
Dr Asset
Cr Refundable advance

*w/ variance power:
Dr Asset
Cr Revenue

Question 20

GR: beneficiary accounting (University)

Answer 20

*w/o variance power:
Dr Receivable
Cr Contr Rev

*w/ variance power:
generally not recorded unless a financial relationship exists

Question 21

financially interrelated recipients:

Answer 21

recipients and beneficiaries are related if:

(1) 1 organization has ability to influence the decisions of the other
(2) 1 organization has an ongoing interest in the other; JE:

Dr Interest in NA
Cr change in interest in recipient NAs

**changes in value JE:
Dr Beneficial interest
Cr Contr Rev

Question 22

Charity care (value of svc HC org gives away) is not displayed in FS’s:

Answer 22

reduce gross patient svc rev with charity care and contractual allowances for 3rd party payments

Question 23

Unveristy and Institution Revenue Recognition:

Answer 23

student tuition and fees reported at GROSS, less scholarships, tuition waivers, and similar reductions (can be displayed as exp)

*tuition + scholarships - refunds = gross revenue tuition

Question 24

Other Operating Revenue list:

Answer 24

• tuition from schools
• revenue from edu programs
• donated supplies and Equip
• specific purpose grants
• revenue from auxiliary activities
• cafeteria revenue
• parking fees
• gift shop revenue
• medical transcription fees

Question 25

Non-op Revenue list:

Answer 25

• interest and DI from CFI
• gifts and bequests
• grants
• income from endowments
• income from board-designated funds
• donated services