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FAR 2014 > NFP Accounting > Flashcards

NFP Accounting Flashcards

1
Q

Which financial statements are required for not - for - profit organizations?

A

Statement of Financial Position

Statement of Activities

Statement of Cash Flows

Statement of Functional Expense (Volunteer Health Organizations Only)

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2
Q

What are the major classifications found on a Statement of Financial Position?

A

Similar to Balance Sheet:

Assets
Liabilities
Net Assets
Unrestricted Assets
Permanently Restricted Assets
Temporarily Restricted Assets

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3
Q

What are the major classifications in a Statement of Activities?

A

Similar to an Income Statement - organization - wide:

Revenues
Expenses - ONLY deducted from Unrestricted Revenues
Gains and Losses
Changes in Net Asset classes
Unrestricted
Permanently Restricted
Temporarily Restricted

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4
Q

What are the characteristics of a Statement of Cash Flows for not - for - profits? What are the major classifications?

A

Both direct and indirect methods are OK

Operating Activities - Unrestricted Revenues and Unrestricted Expenses

Investing Activities

Financing Activities - Endowments and restricted contributions

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5
Q

Which organizations are required to present a Statement of Functional Expenses?

A

Volunteer Health Organizations

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6
Q

Which statements are required for non - governmental hospitals?

A

Balance Sheet
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
Financial Statement Notes

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7
Q

Which basis of accounting is used for revenues and net assets?

A

Accrual basis of accounting is used

Only external parties can restrict the use of assets (permanent or temporary)

Assets earmarked internally by management are still classified as unrestricted

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8
Q

What are the characteristics of unrestricted assets or revenue?

A

No restrictions or conditions placed on entity in order to use the resources

Note: assets earmarked internally by management are still unrestricted

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9
Q

When are revenues on contributions recognized?

A

Revenues on contributions are recognized in the year received - not the year the contribution is spent and are recorded at Fair Value on the date received

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10
Q

When are services rendered considered contributions?

A

If the organization would have otherwise paid for them

or

They increase the value of a non - monetary asset

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11
Q

Is hospital charity care revenue?

A

NO.

It is disclosed in the notes to the financial statements only.

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12
Q

How are unconditional pledges to contribute recorded?

A

Classified as revenue in the current year only - multi - year future contributions fall under Temporarily Restricted.

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13
Q

Which revenues are expenses deducted from?

A

Expenses ONLY deducted from Unrestricted Revenues - not Temporary or Permanently Restricted Revenues/Assets

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14
Q

What are the characteristics of temporarily restricted assets/revenue?

A

Use is restricted to a future time - which could then convert to unrestricted - Class: Temp. Restricted Revenue

Unrestricted contributions promised (including multi - year contributions) - but not yet received are actually restricted by time and are therefore classified as Temporarily Restricted Assets - Multi - year contributions are recorded at the present value of the future contributions

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15
Q

What are the characteristics of an endowment?

A

Use of investment is restricted - but income from investment could be either restricted or unrestricted

Must be under control of receiving entity (Quasi Endowment) in order to be recorded in unrestricted net assets

Otherwise - a memo entry is recorded

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16
Q

When is the donation of an art collection recognized as a contribution or asset?

A

Not recognized as assets or contribution revenue if they are held of display or education’ or their sale results in the purchase of similar items

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17
Q

When both Temporarily Restricted Assets and Unrestricted Assets are available for use - which assets are used first?

A

Temporarily restricted assets are used before Unrestricted assets.

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18
Q

How is a refundable advance recorded by a not for profit?

A

Classified as a Liability

Promise to contribute assets pending on certain conditions being met

Becomes unconditional once the possibility that it won’t happen is remote

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19
Q

How are investments recorded and valued in not - for - profit accounting?

A

Fair Value is mostly used

Exception - Equity method used when significant influence exists

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20
Q

How are scholarships recorded?

A

As a reduction of revenue - netted against college’s tuition

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21
Q

How is depreciation expense recorded by a not - for - profit?

A

Depreciation expense is allocated proportionately to various functions

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22
Q

What additional statement is required for voluntary health and welfare organizations

A

Statement of functional expenses

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23
Q

How are assets reported on statement of financial position

A

Balance sheet

Unrestricted, temp restricted, permanently restricted

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24
Q

How are term and regular endowments recorded

A

Term - temporary restricted

Regular - permanently restricted

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25
Q

When are contributions reported

A

When revenue received regardless of donor imposed restrictions

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26
Q

Where are expenses deducted from

A

Only unrestricted revenues

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27
Q

What is included in cash flow operating activities

A

Revenue and expenses that are unrestricted

28
Q

What financial statements are required for NFP

A

Statement of financial position
Statement of activities
Statement of cash flows

29
Q

What’s included in NFP statement of cash flows

A

Operating
Investing
Financing

30
Q

How are gifts of long lived assets with no restriction recorded

A

Class as unrestricted if accounting policy allows

31
Q

How are contributions received from outside donors for use in research

A

Report and temp restricted assets

32
Q

How is a multitrack pledge recorded

A

Report at PV in temporary restricted revenue

33
Q

How is restricted cash inflow for acquisition of property treated on statement of cash flows

A

Include in financing activities

34
Q

What is the general purpose of NFP FS

A

Focus on basic info of the organization to enhance relevance, understandability, and comparability

35
Q

When is a liability recorded by an entity

A

When entity acts as an agent or trustee

36
Q

How should entity record works of art

A

Don’t recognize contributions if art held for public exhibition and if sold proceeds used to acquire other art

37
Q

Where are change in assets required to be reported

A

Statement of activities

38
Q

Where are expenses according to function presented

A

On FS or in notes to FS

39
Q

How is a quasi endorsement recorded

A

As unrestricted asset

40
Q

How is conditional promise to contribute recorded

A

Refundable advance - liability

41
Q

How is a permanent endowment and investment interest recorded on statement of cash flows

A

Both as financing activity if investment interest used to purchase PPE

42
Q

What are functional and natural expenses and when are they required for health and welfare organizations

A

Functional - program and supporting
Natural - salary expense , depreciation expense

Both required

43
Q

When are donations of services recognized

A

When services create or enhance no financial asset

When services require special skill set that would have to be paid for

44
Q

When is a conditional promise considered unconditional

A

When possibility that condition will not be met is remote

45
Q

How is contribution revenue calculated

A

Amount given above market revenue

46
Q

What triggers a reclassification of assets

A

Expiration of donor imposed restrictions ( time or purpose )

47
Q

How does the expiration of imposed conditions affect asset

A

Only increases asset no reclassification

48
Q

How are investments recognized on NFP books

A

FV is no significant influence

Equity method if significant influence

49
Q

When to record contribution as a liability

A

Donor doesn’t grant recipient variance power

Recipient org and beneficiary are not financially interrelated

50
Q

How is a contribution treated when recipient and beneficiary interrelated and resources must be used to benefit beneficiary

A

Record asset and liability

51
Q

What is variance power

A

Ability to redirect resources transfer to it

52
Q

What is a split interest agreement

A

Donor makes initial gift to trust or directly to NFP and NFP is not sole beneficiary

53
Q

When are joint costs of informational materials recorded

A

As fundraising expense unless an appeal is designed to motivate audience to action other than providing financial support

54
Q

What are considered capital additions

A

Nonexpendable gifts restricted to endowment, plant, loan funds and legally restricted investment income
On investments such as funds

55
Q

How are gifts in kind treated

A

Agency transactions or contributions depending on extent of discretion

56
Q

What is an agency transaction

A

Asset for which organization has too little discretion

57
Q

What FS are required for hospital

A

Balance sheet
Statement of operations
Statement of change in net assets
Statement if cash flows

58
Q

Calculate net patient service revenue

A

Gross patient service revenue less contractual obligation with 3rd party payor less allowance for discounts to hospital employees

59
Q

How is a voluntary health and welfare organization classified

A

As NFP, nonbusiness not hospital

60
Q

What items are reported separate from performance indicator

A 
Extraordinary items
Equity transfers
Receipt of restricted contributions 
Contribution of long lived assets
Restricted investment returns 
Unrealized gain or loss on investment a
61
Q

How are expenses prepared for health care org

A

Using natural or functional classification

62
Q

What is the performance indicator and give example

A

Report of results of operations

Excess revenue over expenses

63
Q

How is charity care recorded

A

Not recorded on FS except in notes

64
Q

How are payments of future services at retirement communities recorded

A

Nonrefundable advance fees as liability

65
Q

What is recorded in other revenue gain and loss for health care org

A

Income from services other than providing health care service or coverage to patients

66
Q

In a health care org at what value are donated noncash assets recorded

A

Fair value

67
Q

On hospital FS how are change in assets displayed

A

Statement of change in net assets - reports change in hospitals unrestricted, temp, perm restricted assets

Statement of operations - discloses only change in unrestricted net assets

Balance sheet - discloses amount of unrestricted , temp restricted, perm restricted assets at certain date

FAR 2014 (19 decks)

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