FAR - Not for Profit Flashcards
What are the conditions to recognize an increase in expenses and contributions? Example: A nfp has to replace damaged windows. A professional glazier replaced them at no charge. How is it reflected in statement of activities?
Reported as an increase in both expenses and contributions.
If the contributed services would have been purchased if not donated, and requires performance by a specialist, it is recorded as an increase in both expenses and contribution.
What are unrestricted net assets? Where is it reported on the cash flow statement?
Things are in the unrestricted net assets category if it is established by the governing board of an organization such as quasi endowment funds. If they decide to set funds aside as permanent investments, never to be spent, it is their chose (unrestricted).
An unrestricted cash contribution would be an inflow from operating activities.
For a nonprofit hospital that received a donation of medical supplies that cost 10k with a price of 15k. It does not have any restrictions and all were used in 2010. How is it reported?
It is reported in both revenue and operating expenses at 15k.
A donation of noncash assets should be reported at FV and reported as an increase in the appropriate net asset class. As there are no restrictions, it increases unrestricted net assets on the statement of operations - it is included in the amount reported for revenues, gains, and other support (as it was used for operations of hospital). This would be reported as part of operating expenses for the period. It would be reported as both a revenue and operating expense of 15k on the statement of operations for 2010.
What is considered unrestricted and temporarily restricted revenues?
- cash contribution to be used at board’s discretion
- promise to contribute 500k from supporter with similar prior contributions
- contributed legal services of 100k, which company would have otherwise purchased
Restricted revenues are recorded only when a restriction has been placed by the donor. One type of restriction is one that has not been received yet (time restriction).
The 850 and 100 are unrestricted. The 100k are contributed services recognized when the services received 1. create/enhance nonfinancial assets 2. require specialized skills and would typically need to be purchased if not provided by donation.
What happens when a donor gives 1000 each year for next 5 years starting in one year from now? How is it reported?
It would be temporary restricted revenues and it is reported at its present value.
What happens if there is a condition for funding in the future and the probability of not meeting the condition is remote?
This would be reported as an increase in temporary restricted net assets on the statement of activities.
Which are recorded as contribution revenue for a nfp animal shelter?
- vet provides animal care
- board member prepares book for audit
- RN is receptionist
- teacher walks dogs
Contributed services should be recognized only when the services 1. create/enhance nonfinancial assets, OR 2. require specialized skills, and would typically be purchased if not for the donation.
This includes the vet services and the services to prepare the books for audit.
What are the required statements for not for profits?
- Statement of operations
- Statement of cash flows
3.
Voluntary health and welfare organizations are required to include a statement of functional expenses. Others are encouraged to disclose but not required.
How do you calculate net patient service revenue?
Gross patient service revenue - provision for contractual adjustments - allowances for discounts = net patient revenue
Note bad debt expense is an operating expense
What is depreciated? Freezer Building costs for construction in progress Land Linens
Freezer is depreciated as it is an exhaustible fixed asset
Building costs for construction in progress - still in construction stage
Land - not exhaustible
Linens - supplies are expensed
What amounts are included in revenue, gains, and other support on the statement of operations?
Unrealized gains on trading securities should be included and in the performance indicator.
Unrestricted revenues from interest and dividends are also included in the revenue, gains, and other support on the statement of operations.
How do you determine the restricted amount if 5% is expected to be uncollectible?
It would be the amount with a restriction on it less the amount estimated to be uncollectible. This would be reported as restricted support in the statement of activities.
How are investments in equity securities accounted for if there is significant influence or if there is 1-3% ownership?
If the company has significant influence over the investee company, it should e reported on the statement of financial position using the equity method.
The 1-3% ownership should be reported at FV.
