NFP Flashcards
How many financial stmts the NFP org need to prepare?
What are they?
What volunteering Heath and wealth org need to prepare additionally
- Three
- Financial stmt is financial position (BS)
Financial stmt of activities (IS)
Financial stmt of CF
- For VHW org: stmt of functional expense
What is included in financials of financial position?
Assets = same as normal FS. (Including restricted for investment) Liability = same as normal FS (including grant payable, refundable advances, annuity obligation)
Other parts of the asset and liabilities the same as the for profit BS.
Net assets ( donor restricted ONLY) 1) Unrestricted net asset -available to use (include the amount set by board)
2) Temp Restricted (purpose and time imposed) - donated by outside party and restricted to specific purpose ( interest from endowment)
3) Permanently restricted- donated by outside party principle is restricted, interest earnings might be restricted or unrestricted
Categories of NFP
How many and what are they?
What accounting method it is using?
These categories follow FASB
- Hospital and other health care entity (including for profit and not for profit), Exception: public (gov’t run) health care (GASB)
- College and university edu orgs (including private)
Exception: community college and state run (GASB) - VHWOs - promote research and edu in social and health related issues that might offer free of low cost service, receive find from donation or grant.
- Other NFP (museum, unions, environmental action groups, churches)
Fully accrual accounting measures economic resource measurement focus.
NFP financial stmt of financial activities items
How many sections and what are they?
Four
Changes in unrestricted assets
1) revenues and Gains (all unrestricted)
2) net assets released from restriction
3) expense and losses ( all unrestricted)
4) chances in net assets (=change in temp and perm)
Increase or decrease in net assets (=increase in unrestricted net assets +/- increase / decrease in temp NA +-increase /decrease of perm NA )
NA at beg
NA at end
Beg balance of net assets
How many categories NFP expense can be grouped?
Programming expense
Expand spend to further the org’s mission (such as research, outreach, clinical care, edu)
Supporting expense
1) Mgmt and general -admin expense
2) fund raising - adv. and promotion and mailing all fund raising activities)
CPA question: what expense belong to what category**
Net assets released from restriction, what kind of restrictions are there and what is the CPA Q in this area?
- Satisfying program restriction - resource spent on intended purpose ( always recognize an expense)
- Assets acquisition restriction - resource spent for intended assets acquisitions purpose (always increase assets)
- Time restriction - time and event for the restriction had occurred
CPA Q to consider: effect on expense and assets account (restricted or unrestricted )
Stmt of CF for NFP
Categories
What method to use?
Identical to for-profit
- Cf from operating activities (all unrestricted revenues and expenses for operating, or revenue restricts for program restriction, including grants to other org)
Ie ( contribution receivable, refundable advances, grants payable, contribution restricted for LT invmt, net realized and unrealized gain/loss on LT invest and other normal items)
- Cf from investing activities
Same as normal cf - Cf from financing activities
1) **contribution and investment restricted for long term purpose (acquisition of capital assets，endowment)
Ie (payment of …, investment and dividend restricted for investment …)
2) other financing activities including debt proceeds,repayment, lease payment, debt financing)
When is Stmt of functional expense used?
What are included?
CPA Q: functional expense stmt is only required by VHWOs, but this recommended for all NFP org.
Include categories of program service and supporting service on top horizontally
All expense items vertically in the left side of the stmt record
Total expense before deprecation
+ depreciation expense
= total expense
- expense directly deducted from revenue
= total expense report by function (horizontal items)
Issues: What is inexhaustible assets? How to record it?
Like art works, culture treasures, historical documents and property
All subject to special rule,
They care categorized as collections or Collectibles
Criterions need to meet as Collection: 1) held for public view, 2) protected and preserved 3) if sold, the proceeds has to use for acquire other collectibles **
Not capitalized when this type of assets are donated, no record of the transaction,
But if sold, no need to report on face of FS, but do need to disclose it! **
Issues: How is NFP counts its investments, where to record the investment G/L?
NFP investment is treated as the same as for profit business, all record at FV.
The chances of investment is recognized in stmt is activities as unrealized G/L during the period.
Differences: NFP not break down debt securities into those common categories and NFP always record debt securities at FV! **
Issues:Endowments
What is regular endowment?
What are other endowments?
Regular endowment is the permanent endowment that has earnings that can be non- expendable or expendable restricted.
The other types can be
1. quasi-endowment - amount set aside by board rather than outside party, principle must be retained, can only spend the earnings from the endowment. **
- Term endowment - gifts and bequests that has to be invested or retained until certain event happen,classified as temp restricted asset.
- Board designated fund- dubs can be spent for specific purpose and the principle can be spent. Classified as unrestricted net assets that he designated for …**
CPA Q: be careful on the distinguish meant of number one and three.
Jeep to report endowment earnings?
Report as endowment income or investment income on the ACCRUAL basis: can be report as these three categories:
1) if no restriction, report as unrestricted
2) if have to spent on special purpose, temp restricted
3) If income can’t be spent, report as permanent restricted NA
Donations and pledges and contribution
How to recognize contribution?
And what are the revenue classifications?
All unconditional contributions are recognized as contribution revenue, no matter it is cash or not.
Conditional contribution if the condition has met, recognized as revenue, if not, as contribution receivable. Classified as temp restricted.
Classification:
1. Unrestricted: resources are available for any purpose and at any time.
- Temp restriction: can be spent in the current period, but have to meet some condition or event happens (program restricted, or capital restriction, or time restriction)
- Permanently restricted ( must be made by external party): resource is not allowed to spend and classified as endowments
What is the revenue restricted by board of directors (internal restriction), is it classified as temp or unrestricted?
ALWAY unrestricted! **
Pledges
What is pledge?
How to record conditional and unconditional pledges and pleaded over multiple periods?
Pledge is the promise to contribute
Conditional:
Pledges JE
Year 1:
At first year when receive the first pledge payment
Cash actual value received
P/R. Xx at rest amount
Contribution - unrestricted (amt received)
Contribution - temp restricted (PV of left amt)
Discount on PR. Discount amt when calculating PV
12/31/01
when recalculating the PV, if PV is higher than recorded, that means discount previously recorded need to be reversed from temp restricted
Year 2:
Receive pledge again, increase cash, decrease PR, and transfer contribution from temp restricted to unrestricted for the amt received. NOT the PV Amt
Year two end: recalculate PV again, same treatment as year one end.
Year 3 when all are received: the total revenue record is PV of originally received + PV adjustment 1 and 2.
**Donated service and its accounting treatment
Highly tested in CPA
Donated service has to meet certain condition to be recognized as revenue
1) non financial assets are enhanced
2) special skill donated by the person possess that skill that would otherwise be purchased
JE: dr. Assets or expense
CR . contribution revenue
If donated building record at FV at date of donation, usually unrestricted assets
Dr building at FV
CR. Contribution revenue
Donated special skill service (i.e. Research)
If given service valued has a standard charge, and FV, ALWAYS record as FV
Dr. Research expense.
CR. Contribution revenue
Donate normal service
Not recognized
Contribution held to distribute to a beneficiary
Donor donate to recipient for specific beneficiary, the org is act as agent, no revenue should be recognized, the assets
Health Care Orgs ( HCO)
Hospital modify overall format of stmt of activities include what sections? What are they?
Operating and non operating sections
Operating revenue
-operating expenses
= operating income
+/- non operating G/L
= change in net assets
+ beg balance net assets
= end net assets
Operating sections
+Net patient service revenue
- provision for bad debt
= net patient service revenue
+ other operating revenues
+ premium revenue (capital fees)
= total operating revenue
What is Patient service revenue and what are included?
** CPAQ: understand where revenues belong to, categories like PSR and other revenues (such as individuals donations, tuition from classes offered, cafeteria sales, gift shops, etc)
- Patient charges directly related to patient room charge, doctors fees, medicines and medical supplies, etc.
Ancillary revenues are also included in PR that are related to radiology, X-Rays, etc.
Charity care - only disclose in note,NOT part of the PSR
Record the gross amt of PSR
Gross PSR
- charity service
= PSR
- contractual adj. (discount given)
= net PSR
-bad debt (FASB require bad debt provision record)
= net PSR less bad debt
+ premium revenue
+ other revenue (not directly related to patient care, but related to the main operation do hospital)
= total revenue
Non- operating revenues and gains include what?
Unrestricted cash and bequest donations ( mostly donated services) and unrestricted investment earnings (Including endowment income)
Donated materials: record as
Dr. assets or expense
Cr. Other operating revenues
If service was donated is the same criterion recognition as normal NFP.
Formate for stmt of health care entity
Starts with
Net PSR
- provision for bad debt
= net PSR less bad debt
\+ premium revenue \+ other operating revenues = total operating revenues - operating expense = income from operations
+/- non operating G/L
( unrestricted contribution, donated service, endowment income)
= total non operating G/L
= change in net assets
+ beg net assets
= end net assets
Reporting for government HCO
What funds to report it?
What accounting stds to following?
What are the stmts required?
Report in proprietary funds using GASB
Stmt of net position
Stmt of rev, exp. And changes in net position
Stmt of CF (four types of CF categories)
Government run College and universities
What stmts are required?
All follow GASB
Stmt of cf
Stmt of net position ( net investment in capital assets, restricted and unrestricted assets)
Stmt of revenue, expense and change in net position
NFP financial stmts required
Follow FASB
Stmt of cf
Stmt of net position ( unrestricted, temp restricted and restricted)
Stmt of activities
What are included in private college stmt of activities?
Revenue, gains and other supports
1. Tuitions and fees: Government grants and contracts, gifts and investment income
- Auxiliary enterprise: other revenue and release from restriction
Expenditure
- Edu general (instruct and research)
- Scholarships and fellowships ( academic support, student service, institutional support, plant operation)
- Auxiliary enterprise
= change in net assets
Net assets at beg of year
What to be aware on tuition revenues?
Reports at net of scholarship allowances and uncollectible amt.
Scholarship allowance is stated tuition - payments made
Scholarship: amt paid by college directly for students
Tuition waiver: report as an expense for college
Tuition refund: deducted from student tuition and fees because it’s a refund due to students didn’t take the classes.
Tuition for academic period is two fiscal periods that need to report in two fiscal years affected.
