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FAR > FARE 9 Not for profit org > Flashcards

FARE 9 Not for profit org Flashcards

1
Q

Characteristics of not for profit org

A
  1. Revenue from contributions
  2. Profit is not a goal
  3. Ownership interests are not like business enterprises
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2
Q

Industries that use not for profit accounting

A
  1. Health care org
  2. Educational Institutions
  3. Voluntary health and welfare org
  4. Other private (not governmental) not for profit org
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3
Q

The basis of accounting

A

Accrual basis of accounting

Primary authority FASB

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4
Q

Financial statements prepared for nongovernmental not for profit

A
  1. Statement of financial position
  2. Statement of activities
  3. Statement of cash flows
  4. Statement of functional expenses
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5
Q

Components of the Statement of Financial Position

A
  1. Assets
  2. Liabilities
  3. Net assets (equity)
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6
Q

The classifications of net assets

A
  1. Unrestricted
  2. Temporarily restricted
  3. Permanently restricted
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7
Q

The classifications of net assets: unrestricted

A

Not permanently or temporarly restricted by donor-imposed stipulations.
Internal board designated funds are unrestricted.

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8
Q

The classifications of net assets: Temporarily restricted

A

Donor-imposed stipulation expires at some point or can be fulfilled or removed.

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9
Q

The classifications of net assets: Permanently restricted

A

Limited by donor-imposed restrictions, that don’t expire

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10
Q

The elements in the statement of activities

A
  1. Change in total net assets
  2. Change in unrestricted net assets
  3. Change in temp restricted net assets
  4. Change in perm restricted net assets
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11
Q

Expense classification in the Statement of Activities

A
  1. Program services- org is charted to do it
  2. Support services - everything else
  3. Combined costs - fundraising and education services
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12
Q

Classifications of the statement of cash flows.

Operating activities

A

Operating activities:

a. Agency transactions
b. If Direct method used- gross receipts
c. Unrestricted resources directed by the governing body to be used for long-lived assets

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13
Q

Classifications of the statement of cash flows.

Investing activities

A

Investing activities:

a. sale/purchase of art work
b. investment in equipment
c. proceeds from sale of assets received in prior periods that were restricted to be invested in equipment

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14
Q

Classifications of the statement of cash flows.

Financing activities

A

Financing activities:

a. Proceeds from restricted contributions
b. Other financing activities

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15
Q

the statement of cash flows.

A

Direct or indirect method

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16
Q

Cash and cash equivalents

A

Exclude donor-restricted securities

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17
Q

Statement of functional expenses

A

Mandatory for voluntary health and welfare org

Optional for all other

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18
Q

Statement of functional expenses

A
  1. The total amount of each functional exp should be clearly disclosed in the statement of activities and or the footnotes.
  2. The statement of functional expenses analyzes expenses by their natural expense classification
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19
Q

Functional classification of expenses

A
  1. Program support expenses - directly related
  2. Fundraising exp - classified functionally and be separately disclosed in the FS.
  3. Management and general costs - the overall direction of the org, record keeping etc
  4. Multiple cost items -belong to several categories
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20
Q

Recognition of cash contributions

A

Revenue or gains in period in which they are received.

Measured at fair value at the date of gift

21
Q

Recognition of unconditional promises (contributions)

A

Revenue at its fair value when the promise is made

22
Q

Recognition Conditional Promises (contributions)

A

Recognized when conditions are met and the promise becomes unconditional

23
Q

Recognition of multi-year pledges

A

Recorded at the net present value at the date of the pledge is made

  1. Future collections are temporarily restricted revenues and net assets
  2. The difference between the previously recorded present value and the current amount collected is considered contribution revenue, not interest income
24
Q

Split interest agreements

A

Shared with other beneficiaries.
Recognized for amortization of discounts and revaluation.
Measured at fair value at the date of acquisition.
Estimated based on the present value of the estimated future distributions.
Displayed as temporarily restricted (may be perm if donor wants that)

25
Q

Specialized Support Transactions

A
  1. Donated services
  2. Donated collection items
  3. Donated materials
26
Q

Specialized Support Transactions

Donated services

A

Not recorded normally, but if meets criteria recorded at fair value:
- create or enhance a nonfinancial asset
- require specializes skills and would have to be purchased (accountant)
If service is solicitations of contributions then it is fundrising expense
Expense or asset Dr
Contributions - nonoperating revenue Cr

27
Q

Specialized Support Transactions

Donated Collection items

A

Recorded unless criteria met:

  • part of collection, which is held for public viewing,
  • collection is cared by the org
  • the org has policy to reinvested in other collection items
28
Q

Specialized Support Transactions

Donated materials significant in amount

A

If significant in amount, donated materials should be recorded at fair value on the date of receipt.
Asset Dr
Contributions - support Cr

29
Q

Specialized Support Transactions

Donated materials that pass through the org (used clothing)

A

Not recorded unless substantial in amount
Expense Dr
Unrestricted contributions - supplies Cr

30
Q

Recording promises to contribute and other support transactions.
Unrestricted contributions.

A

Unconditional promises to contribute in the future are reported as restricted support (implied time restriction) at the present value of the estimated future cash flows using a discount rate commensurate with the risks involved even if their ultimate use is restricted.

31
Q

Recording of unrestricted contributions - unconditional promises to contribute.

A

Pledge receivable - temp restricted Dr
Allowance for doubtful accounts Cr
Contributed revenue - temp restricted Cr

When collected:
Cash - temp restricted Dr
Pledge receivable - temp restricted Cr

Satisfaction of time restriction - temp restricted Dr
Cash - temp restricted Cr

Unrestricted:
Cash - unrestricted Dr
Satisfaction of time restriction - temp restricted Cr

32
Q

Recording of restricted contributions

A

Contribution may be restricted by donor. Recognized as revenues or gains in the period received and as assets, or decrease in liabilities etc depending on the form benefits received.

33
Q

Recording of restricted contributions.

Restricted net assets and later after collected and when money is spent

A

Pledge receivable -temp restricted Dr
Allowance for doubt accounts Cr
Restricted revenue - temp restricted net assets Cr

Later

Reclassification - satisfaction of restriction Dr
Cash/Restricted net assets Cr

Unrestricted net assets:

Unrestricted net assets Dr
Reclassification - satisfaction of restriction CR

Operating exp DR
Cash/Unrestricted net assets CR

34
Q

Distinguishing contributions from other transactions.

Agency transactions

A

Consist of resources received by the not for profit over which the not for profit has little or no discretion or variance power (can’t use as they want)
Accounted for as liabilities if no variance power.

35
Q

Recording Gifts in kind

A

Non cash contributions.

Fair value measurement.

36
Q

Recording Exchange transactions

A
  1. Reciprocal transfers in which each party receives and sacrifices something of approx. equal value are termed exchange transactions.
  2. The cost of premiums given to potential donors as part of a fundraising appeal is classified as a fundraising exp.
  3. Cost of premiums - fundraising exp
  4. The difference between FV of dues and the amount transferred is classified as a contribution.
  5. Exchange transactions are classified as unrestricted revenues and net assets.
37
Q

Recording exchange transaction contributions

A

Amount transferred - FV Dues/Purchases = Contribution revenue

38
Q

General Principles: Recipient Accounting.

A
  1. Without Variance Power
  2. Granted Variance Power
  3. Financially Interrelated - Granted variance power
39
Q

Financially interrelated org are:

A
  1. one org can influence the other
  2. One org has economic interest in the assets of the other
  3. Residual rights are created in this instance that increase or decrease as the value of net assets change.
40
Q

General Principles: Recipient Accounting.

Without variance power

A

Assets used or managed on behalf of a beneficiary without variance power.
1. assets valued at fair value
2. assets are recognized as a liability to the beneficiary
Assets Dr
Refundable advance Cr

41
Q

General Principles: Recipient Accounting.

Granted variance power

A

Assets used or managed on behalf of beneficiary but is granted variance power.
a. valued at FV
b. assets are recognized as contribution revenue when received and expensed
Assets Dr
Contribution revenue Cr

42
Q

General Principles: Recipient Accounting.

Financially interrelated - granted variance power

A 
Assets valued at
1. FV
2. Recognized as contribution revenue when received and expensed when distributed to the beneficiary
Assets Dr
Contribution revenue Cr
43
Q

General Principles: Beneficiary Accounting.

Recognition Rule

A

Specified beneficiaries recognize their rights to assets held by others (the recipient) unless the recipient is explicitly granted variance power.

44
Q

General Principles: Beneficiary Accounting.

Recognized Rights

A

Rights, when recognized will be recorded as any one of the following:

a. an interest in the net assets of the recipient
b. a beneficial interest
c. a receivable and contribution revenue

45
Q

General Principles: Beneficiary Accounting.

Recognized interest - financially interrelated

A

The interest in the net assets of the recipient is adjusted for the beneficiary’s share of the change.

Assets Dr
Equity transaction Cr

46
Q

General Principles: Beneficiary Accounting.

Recognized beneficial interest - pools of assets

A

An unconditional right to receive specified cash flows from pools of assets.
Measurements and re-measurements serve to present assets at FV using discounting or other techniques.
Beneficial interest DR
Contribution revenue CR

47
Q

General Principles: Beneficiary Accounting.

Recognized Receivable and contribution revenue

A

When no recognition of net assets or beneficial interests involved, the beneficiary recognizes a receivable and contribution revenue consistent with treatment of all other unconditional promises to give.
Receivable Dr
Contribution revenue Cr

48
Q

Investment in securities

A
  1. Fair value
  2. Gains and losses - realized and unrealized (in unrestricted net assets)
  3. Derivatives - change in FV in the period of change
  4. Dividends, interest - when earned, unrestricted net assets
  5. Donor’s stipulation - increase in temp or perm restricted net assets

FAR (41 decks)

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