F9 Governmental & Not-for-Profit Organizations Flashcards
How are transfers of operations measured?
Transfer of operations transactions are measured at their carrying value at the transfer date w/ possible recognition of impairment and no recognition of intangible assets such as goodwill;
- assets that are to be used are displayed at their carrying value
- assets that are held for disposal are subject to impairment
Is depreciation expense recorded in the F/S of a nonprofit organization?
Depr expense and accumulated depr are recorded.
When are donated services displayed as revenue and expense (or capital improvement) on the F/S of not-for-profit organizations? SOME
Donated services are recognized as revenue on the financial statements of not-for-profit organizations SOME of the time. Recognized donated services must meet the following criteria:
- Specialized skill was required to deliver the service and it was delivered by an individual possessing those skills;
- Otherwise needed service (would have been purchased by the organizations anyway);
- Measured Easily (the accurate valuation of the service is easy).
What is the format of the government-wide statement of activities?
The gov’t wide statement of activities is presented in a net cost format defined as follows:
- revenues separated into program revenues (SOC) and general revenues
- expenses are reduced by program revenues resulting in net (expense) revenues and changes in net position
- general revenues, extraordinary items, and special items are reported separately
- result is change in net position
List the types of interfund transactions
Reciprocal interfund activity;
- interfund loans
- interfund services provided and used
Nonreciprocal interfund activity:
- interfund transfers
- interfund reimbursements
How are donated materials accounted for?
Recorded as revenue at FV on date of receipt, if FV can be objectively determined.
Contributions of works of art, historical treasures, etc., need not be recognized as revenue if they are protected by the organization, held by the organization and, if sold, the proceeds of the sale are designated for the acquisitions of other works.
Name the classifications of the statement of cash flows for not-for-profit organizations.
- cash flows from operating activities
- cash flows from investing activities
- cash flows from financing activities
List the components of program revenues in the statement of activities: SOC
Service charges
Operating grants and contributions
Capital grants and contributions
Identify the four required elements in the statement of activities for not-for-profit organizations
- change in total net assets
- change in unrestricted net assets
- change in temporarily restricted net assets
- change in permanently restricted net assets
Define a primary government; SELF
Primary governments are usually represented by a general-purpose government such as a state, county, city or other jurisdiction that can stand by itSELF
Separately
Elected boards
Legally separate entity
Financial self-sufficient
Name the functional classification of expenses commonly used in not-for-profit organizations.
- program expenses
- support expenses
- fundraising expenses
- management and general
What is the definition of a governmental merger?
Governmental mergers are defined as the combination of legally separate entities w/out the exchange of significant considerations resulting in the elimination of an entity or entities and either the continuation of a single merged entity or the creation of a new government.
How are marketable securities reported?
All debt securities and those equity securities that have readily determinable fair values are measured at FV.
Name some of the significant potential reconciling items between changes in fund balance displayed on the statement of revenues expenditures and changes in fund balance in the governmental funds’ F/S and the change in net position displayed in the government-wide statement of activities.
Reconciling items may result from differences in measurement focus or basis of accounting (GOES BARE)
Governmental fund changes in fund balance +
Other financing sources (debt proceeds)
Expenditure - capital outlay (net of depreciation) principal payments on debt
Service (internal) fund change in net position may need to be added
Basis of accounting
Accrual differences resulting in revenues or expenses for
Revenue converted from modified to full accrual (e.g., accrual of earned tax revenues even though collected more than 60 days after year end)
Expenditures converted to expenses (e.g., accrual of interest expenses)
What is the appropriate reporting treatment of donated works of art and historical treasures held by a governmental organization?
Gov’ts may elect not to capitalize donated works of art if works are protected and displayed and proceeds from any future sales are going to be reinvested in other works.
The statement of cash flows is prepared for which funds? What are the sections of the statement of cash flows?
A statement of cash flows is prepared for proprietary funds
- cash flows from operating activities
- cash flows from noncapital financing activities
- cash flows from capital and related financing activities
- cash flows from investing activities
What are the recognition criteria for:
- cash contributions
- unconditional promises
- conditional promises
- multi-year pledges
Cash contributions: as revenues or gains in the period in which they are received, measures at FV at the date of gift
Unconditional promises (pledges): recorded at its FV when received
Conditional promises (pledges): recognition occurs when future event occurs (condition met)
What is a CAFR? What does it include?
CAFR: Comprehensive Annual Financial Report Intro section - letter of transmittal - organizational chart - list of principal officers
Basic F/S and required supplementary info (GASB 34)
- MD & A
- Gov’t wide F/S
- fund F/S
- Notes to the F/S
- required supplementary information
Statistical section
State the reporting treatment of internal service funds.
Activities resulting from internal service funds are reported in proprietary funds and should be reported in the governmental activities column of the gov’t-wide F/S, unless the gov’ts enterprise funds are the primary recipient of internal service fund services.
How are pledges accounted for?
Unconditional promises to contribute in the future (pledges) are reported as restricted support (time restriction), at the present value of the estimated future cash flows using a discount rate commensurate w/ the risks involved.
Define the criteria for discrete and blended presentations of component units.
Blended: when the component unit is, in substance, the same as the primary government:
- a board of the component unit is “substantively the same as that of the primary government”
- the component unit serves the primary gov’t exclusively or almost exclusively
- the component unit is not a legal entity
Discrete: when the criteria for blended presentation are not met.
Identify the basis of accounting for not-for-profit organizations.
Accrual basis of accounting
What are the basic sections of external financial reports for governmental entities using the integrated reporting model established by GASB 34?
MD&A (required supplementary information)
Government-wide F/S
Fund financial statements (reconciled to gov’t-wide F/S)
Notes to the F/S
Required supplementary information (RSI) - other than MD&A
What is the threshold for identification as a major fund?
Total assets and deferred outflows of revenue, liabilities and deferred inflows of revenue, revenue, or expenditures/expenses of the individual fund are:
- at least 10% of the corresponding total for fund category to which the major fund belongs; and
- at least 5% of the corresponding total for all governmental and enterprise funds combined
What is the definition of a transfer of operations?
Transfers of operations are defined as a combination of a gov’ts activities (less than a legal entity) w/ either an existing gov’t or w/ a new gov’t.
When are eliminating entries made as part of preparing gov’t-wide F/S?
Interfund activities between funds that are consolidated within governmental or business-type activity reporting categories are eliminated when preparing gov’t-wide F/S.
Define a component unit.
Component units are those gov’t or not-for-profit organizations that either do not meet the criteria of a primary gov’t or are so intertwined w/ the primary gov’t that exclusion from the primary gov’ts F/S would cause the primary gov’ts F/S to be misleading.
What is the definition of a governmental acquisition?
The acquisition of one legally separate entity by another legally separate entity in exchange for significant consideration, resulting in the continuation of the acquiring gov’t.
In considering transferring assets from a recipient organization to a beneficiary organization, when are the assets received recognized as liabilities by the recipient organization?
When assets are transferred w/out variance power so that the recipient organization does not have the unilateral ability authority to redirect assets to another beneficiary, those transfers are recognized as liabilities.
When are gains and losses on investments reported?
Gains and losses on investments are reported in the statement of activities as increases or decreases in unrestricted net assets, unless the use of the investment is restricted by explicit donor stipulations or by law.
How are merger transactions measured at the merger date? What is the difference in presentation for assets to be used as compared to assets held for disposal.?
Transactions are measured at their carrying value at the merger date with possible recognition of impairment and no recognition of intangible assets such as goodwill.
- Assets that are to be used are displayed at their carrying value
- assets that are held for disposal are subject to impairment
Describe how patient service revenue is recorded.
Patient service revenue is recorded on the gross basis using established rates. Note that charity care does not qualify for recognition as revenue.
Provisions for contractual adjustments and discounts are then deducted to arrive at net service revenue
The allowance for uncollectibles is treated as an expense for the period during which the services are provided.
Identify the three components of net position displayed on government-wide F/S
- invested in capital assets, net
- restricted (from external sources by category)
- unrestricted
What does the term variance power mean in the context of not-for-profit accounting and reporting?
Variance power defines the extent to which an organization has discretion over the use of the resources it receives. The presence or absence of variance power governs the recognition of the asset received as revenue or a liability.
What F/S’s are prepared for nongovernmental not-for-profit entities?
- statement of financial position
- statement of activities
- statement of cash flows
- statement of functional expenses (required for voluntary health and welfare organizations, optional but encouraged for all others)
What two methods are available for reporting component units of a primary government’s financial statements?
Blended: Consolidated w/ the primary government
Discrete: Show in separate column as a component unit.
What are the minimum disclosure requirements on the government-wide statement of net position?
Primary government
- government activities
- business-type activities
- total primary gov’t activities
Discretely presented component units.
Name some significant potential reconciling items between fund balance accounts displayed on the B/S of the governmental funds financial statements and net position displayed in the government-wide B/S.
Reconciling items may result from differences in measurement focus or basis of accounting (GALS BARE)
Governmental fund equity (fund balances) +
Assets (noncurrent) -
Long-term debt +
Internal Service Fund net position
Basis of accounting
Accrual differences resulting in receivables or payables for
Revenue converted from modified to full accrual or
Expenses
In considering transferring assets from a recipient organization to a beneficiary organization, when are the assets received recognized as revenue by the recipient organization?
When assets are transferred w/ variance power, which gives the recipient organization the unilateral authority to redirect assets to another beneficiary, the transfer is recognized as revenue
For health care entities, identify the revenue accounts
- patient service revenue
- other operating revenue, including tuition from schools, educational programs, donated supplies and equipment, and specific purpose grants
- nonoperating revenue, gains/losses, including unrestricted interest and dividend income from investing activities, unrestricted gains, donated services, etc.
If student tuition and fees are displayed at gross amounts, what happens to scholarships and tuition waivers?
Scholarships and tuition wavers may be displayed as expenditures or as a contra revenue line item.
Describe the treatment of charity care in a health care organization.
Charity care is not recognized as either revenue or expense on the F/S’s of a health care organization
Charity care represents services for which the health care organization does not anticipate any cash flows.
What sections of the external financial reporting model represent the basic F/S’s?
- government wide financial statements
- fund financial statements
- noted to the financial statements
For a university, identify common unrestricted revenues.
- student tuition & fees, at gross
- government aid, grants and contracts
- gifts and private grants
- endowment income
- sales and services of educational departments
- revenues of auxiliary enterprises.
What are some of the major topics included in MD&A?
- description of the basic F/S
- identity of the primary gov’t and discrete components
- economic conditions and outlook
- major initiatives.
How are acquisition transactions measured?
Measured at their acquisition value (price that would be paid for acquiring similar assets) as of the acquisition date except for the following specifically identified transactions, which are valued using the accounting principles for state and local governments that are applicable to them;
- employment benefit arrangements
- landfill closure costs
- derivative transactions
Name the primary authoritative source for GAAP for not-for-profit organizations.
Financial Accounting Standards Board
Name the classifications of net assets.
- unrestricted
- temporarily restricted
- permanently restricted
Define infrastructure assets, and describe where they are reported.
Infrastructure assets refer to streets, bridges, gutters, water systems, and other assets of the government
They are reported as assets in the gov’t-wide statements, at historical cost and depreciated unless certain conditions are met for reporting using the modified approach.
How do charitable equity securities appear on the F/S of a NFP?
They are recorded at FV in statement of financial position and any gain/loss is recorded in statement of activities as increases/decreases in unrestricted net assets
