FAR - NFP - Donations, Pledges, Contributions, Net Assets

Question 1

Contribution Revenue Characteristics

Answer 1

1) Unconditional:
- if there is a condition, MUST wait for it to be met

2) Nonreciprocal:
- if reciprocal = exchange transaction

3) Voluntary
4) Not an ownership investment

Question 2

Types of Contributions

Answer 2

1) Donated Assets (cash, art, equip)
2) Donated Services (architect, auditor)
3) Pledges to give:
- Conditional: require matching by NPO
- Restriction: used within a certain amount of time/purpose

Question 3

3 classes of net assets

Answer 3

1) unrestricted (used only for expenses & used mostly)
2) temporarily restricted (time/purpose)
3) permanently restricted (endowments)

*restrictions affect WHERE contribution revenue is reported, NOT WHEN

Question 4

Conditions & Restrictions

Answer 4

• If condition exists, cannot recognize revenue until condition is met. (condition = recognized liability) if condition is impossible to satisfy, ignore condition.
• If no condition exists, then restriction rules apply

Question 5

Perm. Restriction Earnings (income)

Answer 5

either unrestricted or temp restricted support

Question 6

Temp. Restriction Exception

Answer 6

IF temp restriction met in same period as donation…..CAN be treated as NOT having a temporary restriction, therefore, treating the donation as unrestricted support

Question 7

Donated Assets other than cash

Answer 7

Recorded @ FV

Question 8

Implied Time Restriction

Answer 8

if depreciable property is donated, entity can adopt a policy to recognize implied time restriction

Question 9

Variance Power

Answer 9

NPO receives donations as an “intermediary” and must use or transfer to other beneficiaries

Recognize contribution revenue if org has a “unilateral right to redirect use of assets to parties other than specified beneficiary” (variance power)

If variance power NOT granted, liab recognized instead of contribution revenue

NPO = middle man to specified beneficiaries Variance power -> no specified beneficiaries

Question 10

Collections

Answer 10

Works of art, artifacts, similar assets.

NPOs can elect NOT to capitalize collections if al 3 conditions are met:

1) held for public exhibition, education, research,
2) protected/preserved
3) subject to policy that requires proceeds of collection items to be used to acquire other items for collection

Question 11

Donated Services

Answer 11

Report FV of services as both EXPENSE/REVENUE if:

1) service = special skills AND
2) person possesses skills AND
3) measurable services AND
4) entity employees service donor

Question 12

Pledges & Time

Answer 12

unrestricted revenue = recognized for net amount expected to be collected within 1 yr

revenue for collections to be made in more than 1 yr are recognized @ PV and as temp restricted supported

Question 13

Fundraising events

Answer 13

Revenues reported @ gross unless event is incidental/peripheral

Options for reporting expense direct costs:

• expense deduction from related revenue
• separate line in expense section
• Gain reported if event = incidental/peripheral

Question 14

Memberships

Answer 14

Both a contribution/service element

Exchange revenues for which benefits/services are made available - revenue recovered over period that benefits are provided

• contributions recognized as revenues when received

Question 15

general revenue recognition rule for contributions.

Answer 15

contributions are recognized as revenue in the period when the contribution is made, regardless of whether they are received in cash or not

Question 16

True/False

Conditional contribution made recognized as a liability known as “refundable advance” because it is uncertain of being matched/satisfied

Answer 16

true

Question 17

true/false

unconditional promises to give (“pledges”) be recognized on the accrual basis net of the estimate of uncollectible pledges

Answer 17

true

Therefore, recognize whatever is accrued and NOT collected.