Financial Reporting (30% - 40%) - II

Question 1

Per SFAC 8, what items should consider note disclosure?

Answer 1

1. Past and current events that could have an impact on a company’s cash flows
2. Information about the reporting entity
3. Financial statement line item explantions

Question 2

What are the criterial for “vulnerability to concentrations?”

Answer 2

1. Concentrations exist at the date in the financial statements
2. Concentration make the entity vulnerable to the risk of a severe impact in the near term
3. Reasonable possibility the event may occur in the near term

Question 3

Are contingent gains disclosed in the notes to the financial statements?

Answer 3

Gains are disclosed in the notes but are not accrued in the financial statements

Question 4

Are contingent losses disclosed int he notes to the financial statement?

Answer 4

Losses are disclosed in the notes and accrued in the financial statements. The accrual is the most likely estimate of the outcome or the lowest amount in a range of estimated outcomes

Question 5

What is the risk of accounting estimates?

Answer 5

Estimated assets are overstated and estimated liabilities are understated

Question 6

What are the required financial statements of a NFP?

Answer 6

1. Statement of financial position
2. Statement of activities
3. Statement of cash flows

Question 7

What are the only two types of net assets?

Answer 7

Net assets with donor restrictions and net assets without donor restrictions.

Question 8

What is the definition of net assets?

Answer 8

Residual interest - the assets of the NFP that remain after liabilities are deducted.

Question 9

What is a promise to give or pledge?

Answer 9

An unconditional agreement to transfer assets to an entity which are accounted for as contributions receivable until collected.

Question 10

How are investments in equity securites reported on the financial statements of a NFP?

Answer 10

Farket value. Unrealized gains and losses are also measured at FV and increase or decrease net assets.

Question 11

Is restricted cash considered a current or non-current asset for an NFP?

Answer 11

Restricted as the cash is not expected to be spend int he near-term.

Question 12

Are prepaids considered a current or non-current asset for a NFP?

Answer 12

The portion that will be expensed in one year or less is current and the portion that will be expenses after one year is non-current.

Question 13

Waht is the purpose of a statement of financial position for a NFP?

Answer 13

Report the assets, liabilities, and net assets at a point in time.

Question 14

What are the three options FASB permits for reporting collections (the arts)?

Answer 14

1. Capitalize all collections purchased or donated after the effective date of the FASB’s guidance
2. Do not capitalize collections
3. Capitalize all collections purchased or donated

Question 15

When are restricted contributions recognized?

Answer 15

When received or promised

Question 16

When are condition contributions recognized?

Answer 16

Conditional contributions are not recognized until the condition has been met

Question 17

What are exchange contributions?

Answer 17

Exchange contributions required a recipricol transfer between the donor and recipient. In these situations, the donation is reduced by the fair market value of the consideration given by the NFP.

Question 18

NFP expenses are broken down by function. What are the the functions?

Answer 18

Functional - expenses associated with the mission of the NFP

Supporting - Management and general expense, fundraising, and membership development

Question 19

How are contribution revenues recognized?

Answer 19

Donated services are fair value with a matching expense

Question 20

When are promises to contribute in subsequent years recognized?

Answer 20

Promises to contribute are recognized immediately but are restricted as the funds are not available near term

Question 21

When is the contribution of services recognized?

Answer 21

Contribution of services are recognized when the services contributed create or enhance non-financial assets or require specialized skill the NFP would need to purchase if not donated

Question 22

When restricted net assets reclassified?

Answer 22

Restricted net assets are reclassified when there is a change in the donor’s restriction or the restriction has been fulfilled

Question 23

How is restricted and unconditional support recieved in subsequent years recorded?

Answer 23

PV of the donation

Question 24

Jurisdiction of government organizations?

Answer 24

Body corporate and politic and entities with the power to enact a tax levy

Question 25

Jurisdiction of NFP?

Answer 25

Exempt from federal taxation

Question 26

For NFP’s, how are unrestricted contributions recorded on the statement of cash flows?

Answer 26

Operating activities section of the cash flow statement

Question 27

For NFP’s, how are restricted contributions recorded on the statement of cash flows?

Answer 27

Financing activities section of the cash flow statement

Question 28

How are contributions for long-term purposes report on the statement of cash flows?

Answer 28

Financing activities section of the cash flow statement

Question 29

What are the required quantitative note disclosures for an NFP?

Answer 29

1. Availability of financial assets to meet the cash needs for general expenditures within one year
2. External limits imposed by donors, laws, and contracts
3. Availability of financial assets due to their nature
4. Internal limitations

Question 30

What are the underwater endowment disclosures required for an NFP?

Answer 30

1. NFP’s policy and actions taken during the period concerning the underwater endowment
2. Aggregate FV of underwater endowment funds
3. Total original endowment gifts or required levels to be maintained
4. Total fund deficiencies