FAR - NFP Flashcards
How should a NFP report the relationship between functional classifications and natural classifications?
They can report on either:
- one the face of the Statement of Activities
- As a schedule in the notes to the financial statements
- In a separate financial statement
What are the required financial statements for NFP?
Statement of Financial Position, Statement of Activities, and Statement of cash flows
Where should the proceeds from the sale of financial assets be reported in the cash flow statement?
Operating activities
Where should the proceeds from the sale or purchase of works of art be reported in the cash flow statement?
Investing activities
Where should receipts from contributions restricted for the purpose of acquiring, constructing, or improving PPE (or other long lived assets) be reported on the cash flow statement?
Financing activities
How is a multi year pledge reported in the financials?
it is reported at the PV of the expected cash payments. A receivable gets debited and revenue gets credited.
the difference between the actual cash payment and the PV is recorded as contribution revenue each year
How are allowances for uncollectable pledgers recorded? Assume $100K pledge and $10K uncollectible.
they are reported net of the receivable and revenue.
the entry would be $90K receivable and $90K revenue
What is a split interest agreement and how is it recorded?
this is when contributions are made into a trust and shared with other beneficiaries. For example, Cliff donates his PM stock to Church, he wants $40K for dividends each year and the excess goes to CHurch. When he dies the stock goes to Church.
they are considered donor restricted and recorded at FV
What are some examples of fundraising expenses?
cost of soliciting volunteers, cost of premiums (mugs, calendars, tote bags) offered as a fundraising campaign, cost of premiums to acknowledge receipt of donation
Explain the different pledges and how they are recorded:
- Conditional Promise to Give - not recognized until the condition has been substantially met
- Unconditional Promise to Give - recognized in the year the promise/pledge has been made
If less than a year - realize at NRV (A/R minus Allowance)
If more than a year - measured at FV, discount to PV
explain the revenue recognized for donated services
if a service is professional in nature & the NFP would otherwise have to pay then the service should be recorded as revenue.
Dr expense/asset
Cr Contribution Revenue
How does an intermediary (agent) record a contribution of assets?
generally the intermediary will recognize an asset and liability when it receives a donation or contribution. however if the agent/intermediary is interrelated to the beneficiary or has variance power, then contribution REVENUE is recognized
What is variance power?
it is when the agent or intermediary has the ability to redirect the assets it receives to an entity other than the beneficiary organization
Where does FASB allow the reporting of functional classifications?
either on the face of the financial statements or in the notes to the statements
Does the FASB require NFPs use the direct or indirect method for cash flow statements?
FASB allows for either direct or indirect method. Note that unlike for profit GAAP, the FASB does not require a reconciliation of change in total net assets to net cash when the direct method is used. it is optional.
