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FAR > F9- Not-for-Profit Acct > Flashcards

F9- Not-for-Profit Acct Flashcards

1
Q

Which financial statements are required for not - for - profit organizations?

A

Statement of Financial Position

Statement of Activities

Statement of Cash Flows

Statement of Functional Expense (Volunteer Health Organizations Only)

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2
Q

What are the major classifications found on a Statement of Financial Position?
[B/S]

A
  • Assets
  • Liabilities
  • Net Assets
  • Unrestricted Assets
  • Permanently Restricted Assets
  • Temporarily Restricted Assets
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3
Q

What are the major classifications in a Statement of Activities?

A

Similar to an Income Statement - organization - wide:

Revenues
Expenses - ONLY deducted from Unrestricted Revenues
Gains and Losses
Changes in Net Asset classes
Unrestricted
Permanently Restricted
Temporarily Restricted

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4
Q

What are the characteristics of a Statement of Cash Flows for not - for - profits? What are the major classifications?

A

Both direct and indirect methods are OK

Operating Activities :
- Unrestricted Revenues and Unrestricted Expenses

Investing Activities

Financing Activities - Endowments and restricted contributions

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5
Q

Which organizations are required to present a Statement of Functional Expenses?

A

Volunteer Health Organizations & Welfare organizations

Optional for all other NFP Organizations

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6
Q

Which statements are required for non - governmental hospitals?

A

Balance Sheet

Statement of Operations

Statement of Changes in Net Assets

Statement of Cash Flows

Financial Statement Notes

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7
Q

Which basis of accounting is used for revenues and net assets?

A

Accrual basis of accounting is used

Only external parties can restrict the use of assets (permanent or temporary)

Assets earmarked internally by management are still classified as unrestricted

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8
Q

What are the characteristics of unrestricted assets or revenue?

A

No restrictions or conditions placed on entity in order to use the resources

Note: assets earmarked internally by management are still unrestricted

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9
Q

When are revenues on contributions recognized?

A
  • Revenues on contributions are recognized in the year received
  • Not the year the contribution is spent and are recorded at Fair Value on the date received
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10
Q

When are services rendered considered contributions?

A

If the organization would have otherwise paid for them

or

They increase the value of a non - monetary asset

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11
Q

Is hospital charity care revenue?

A

NO.

It is disclosed in the notes to the financial statements only.

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12
Q

How are Unconditional Pledges/Promises to contribute recorded?

A
  • Classified as revenue in the current year only
  • Multi - year future contributions fall under Temporarily Restricted.

Recorded at its FV when promise is made

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13
Q

Which revenues are expenses deducted from?

A
  • Expenses ONLY deducted from Unrestricted
  • Revenues - not Temporary or Permanently
  • Restricted Revenues/Assets
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14
Q

What are the characteristics of temporarily restricted assets/revenue?

A
  • Use is restricted to a future time - which could then convert to unrestricted
  • Class: Temp. Restricted Revenue

Unrestricted contributions promised (including multi - year contributions)

  • But not yet received are actually restricted by time and are therefore classified as Temporarily Restricted Assets
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15
Q

What are the characteristics of an endowment?

A

Use of investment is restricted - but income from investment could be either restricted or unrestricted

Must be under control of receiving entity (Quasi Endowment) in order to be recorded in unrestricted net assets

Otherwise - a memo entry is recorded

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16
Q

When is the donation of an art collection recognized as a contribution or asset?

A

Not recognized as assets or contribution revenue if they are held of display or education’ or their sale results in the purchase of similar items

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17
Q

When both Temporarily Restricted Assets and Unrestricted Assets are available for use - which assets are used first?

A

Temporarily restricted assets are used before Unrestricted assets.

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18
Q

How is a refundable advance recorded by a not for profit?

A

Classified as a Liability

Promise to contribute assets pending on certain conditions being met

Becomes unconditional once the possibility that it won’t happen is remote

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19
Q

How are investments recorded and valued in not - for - profit accounting?

A

Fair Value is mostly used

Exception: Equity method used when significant influence exists

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20
Q

How are scholarships recorded?

A

As a reduction of revenue - netted against college’s tuition

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21
Q

How is depreciation expense recorded by a not - for - profit?

A

Depreciation expense is allocated proportionately to various functions

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22
Q

How is donated property recorded by the donee?

A

Recorded at Fair Value + costs associated with getting the property into working condition for its designed purpose

Exam Tip - Think of a charity holding afair and then donating the property which is then recorded atfair value

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23
Q

How is donation of property recorded by the donor?

A

Recorded at Fair Value of asset given up.

Gain or Loss is recorded.

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24
Q

When a Donor Restriction is satisfied:

A
  • A reclassification is reported on the Statement of Activities
  • Items that simultaneously increase one net asset class & decrease another
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25
Q

Combined Costs: Fundraising

[Exp. in St. of Activities]

A
  • NFP Organizations that combine fund-raising efforts with educational (or Programs) services should allocate the combined cost betwn functions.
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26
Q

Net Assets from Restrictions in a St. of Activities

A

‘PET’
- Satisfaction of Program restrictions

  • Satisfaction of Equipment acquisition restrictions
  • Expiration of Time restrictions
27
Q

Operating Activities Includes?

[St. of Cash Flows]

A
  • Receipts of Unrestricted Resources designated by the governing body to be used for long-lived assets
28
Q

Financing Activities: Proceeds from Restricted Contributions

[St. of CF]

A

Cash Received:
- Donor-imposed restrictions limiting its use to long-term purposes.

Other Financing Activities:
- Receipts of Dividends & Interest restricted to reinvestment.

29
Q

Investing Activities Includes?

[St. of Cash Flows]

A
  • Investment in Equipment
  • Proceeds from the sale of assets that were received in prior periods
  • Whose sale proceeds were restricted to investment in equipment.
30
Q

Cash & Cash Equivalents: Exclusions

A
  • Donor-restricted securities that may otherwise meet the cash equivalent definition in commercial accounting.
31
Q

Conditional Promises

A
  • A transaction that depends on an occurrence of a future & uncertain event.
  • Recognition doesn’t occur until the conditions are substantially met.
32
Q

Multi-Year Pledges: PV of Future collections are considered?

A
  • Temporarily Restricted Revenues
    &
  • Net assets
    (Time-restricted)
33
Q

Split Interest Agreements: Recognized Assets & Liabilities

A
  • Should be Disclosed Separately from other Assets & Liab. in the St. of Fin. Position
34
Q

Donated Services

A

Contributions are Recognized ‘SOME’ of the time:

  • Specialized skills are req. & possessed by the donor
  • Otherwise needed by the organization
  • Measurable
  • Easily (at FV)
35
Q

Donated Collection Items NOT required to be recorded if all requirements are met:

A
  • Item is part of a collection, held for public viewing, exhibition, etc.
    &
  • Collection is cared for, preserved & protected by the organization
    &
  • Organization has a policy that Req. any proceeds from the sale of donated items to be reinvested in other collection items.
36
Q

Gifts In-Kind

A
  • Donated as part of a fund-raising appeal are valued at FV, when received & revalued upon their sale in part of the Fundraising
  • The Difference between is accounted for as an additional contribution
37
Q

Exchange Transactions: Cost of premiums given to potential donors as part of a Fund-raising appeal is classified as?

A
  • A Fundraising Expense
38
Q

Investment in Securities: FAIR VALUE

A
  • All debt securities & those equity securities that have readily determinable FV are measured at FV in the St. of Fin. Position
39
Q

Investment in Securities: GAINS/LOSSES

A
  • Realized & Unrealized
  • Reported in the St. of Activities
  • Allocate pooled investments G/L equitably
40
Q

Market Losses on Permanently Restricted Net Assets

A
  • Losses first go to reduce Temporarily Restricted Net Assets to the extent that previously recogn. gains
  • That have not been earned or used in Temp. Restricted.
41
Q

Rev. & Gains from Perm. Restricted Net Assets

A
  • Identified for specific uses by the donor
    &
  • Classified as Temporarily restricted.
42
Q

Colleges: Revenues

A
  • All increases in Unrestricted Net Assets & ALL Restricted resources that were actually Expended during the period.
  • Student Tuition & Fees:

~ Reported at Gross Amount
~ Expenditures: Tuition, Scholarships

43
Q

Patient Service Revenue

A
  • Should be accounted for on the accrual basis at established standard rates
  • Even if the full amt. is not expected to be collected.
  • Central Transactions include Medical services:
    Doctors, surgery, recovery room, room & Board.
44
Q

Patient Service Revenue: Deductions

A

Although, P.S.Rev is accounted for on Gross basis:

  • Deductions are made from Gross Rev. to report patient service rev. net of deductions
  • Uncompensated Services:

~Contractual adjustments for 3rd party payments

45
Q

Patient Service: Central Transactions

A
  • Medical services includes:
  • Doctors
  • Surgery
  • Recovery room
  • Room & Board.
46
Q

Charity Care

A
  • Is not recorded as a Receivable or as Revenue
47
Q

Health Care Organizations: Other Operating Revenues

A
  • Tuition from schools
  • Revenues from educational programs
  • Donated supplies & Equipment
  • Specific purpose Grants
  • Rev from auxiliary activities
  • Medical Transcription Fees
  • Cafeteria Rev., Parking Fees, Gift Shop Rev.
48
Q

Health Care Organizations: Non-Operating Revenues

A
  • Unrestricted Interest & Dividend Inc. from Investment Activities
  • Donated Services
49
Q

Income in Direct Method in Operating Activities Includes?

A

~Program Inc

~Interest Inc.

~Dividend Inc

50
Q

Proceeds from Restricted Contributions: Cash Disbursements

A
  • For either Temp. investments or the purpose for which they were intended as classified as Investing Activity.
51
Q

Split Interest Agreements: Values of Contribution Rev. & Changes

A
  • Should be Disclosed in separate line items in the St. of Activities
52
Q

Multi-Year Pledges: The difference betwn the previously recorded PV & the Current amount collected is considered?

A

Contribution Revenue

[NOT interest income]

53
Q

Exchange Transactions: The Difference betwn FV of dues or other purchases & the Amt. transferred is classified?

A
  • As a Contribution
54
Q

What would be included in ‘Other Operating Revenue of a Hospital?

A
  • Rev. from Educational Programs
55
Q

Colleges record Revenues from tuition & fees are reported at what amount?

A
  • Gross Amount
  • Only Refunds are netted against Rev.
  • Scholarships & Tuition Remissions are shown separately as Exp.
56
Q

At what amount should a Donee report Marketable Equity Sec. in its Yr-End B/S

A
  • The Market Value at the Balance Sheet Date
57
Q

What activity in the St. of Cash Flows should a Contribution for construction of new buildings be reported in?

A
  • Financing Activities
58
Q

What should be included in Total Expenses?

A
  • Depreciation
    &
  • Grants to other organizations
59
Q

What should be classified in the St. of Functional Expenses for Support Services?

A
  • Salaries of fundraisers for funds used in research
60
Q

How should an NFP, report a donor-restricted cash contributions for long-term purposes in its St. of Cash Flows?

A
  • Financing activity Inflow
61
Q

A NFP, received a Contribution in Yr.1, Donor Restricted use until Yr. 2. How should Donee record the Contribution?

A
  • Report as Income in Year 1

- Classify as Temporarily restricted until Time period for restriction has passed

62
Q

A NFP is financially interrelated with a Beneficiary organization, Receipts of the NFP would be disclosed in the F/S of Beneficiary’s as?

A
  • An Equity transaction on the Statement of Activities
63
Q

A NFP would display proceeds from the sale of a Art that was previously donated, & to purchase additional Art for display in what Activity in Cash Flows?

A
  • Investing Activities
64
Q

A NFP received funds from another NFP, how should these funds be recorded?

A
  • Increase in Assets & Liabilities

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