NFP Accounting Flashcards
What is the accounting treatment for donations with variance power (NFP)?
- Recognize contribution revenue if the organization has unilateral right to redirect use of assets to the parties other than the specified beneficiary (i.e vairance power).
- DR: Asset
- CR: Contribution Revenue
- if variance power is not explicitly granted, recognize liability
- DR: Asset
- CR: Refundable Advance liability
- Beneficiary doesn’t book anything until they are awarded the money
What is a term endowment? Regular endowment? How are they reported on an NFP statement of activities?
- Term endowment: allows portion of principal to be spent each period
- Regular endowment: does not allow any principal to be spent
- Both are reported as net assets with donor restriction
When is cash donation from a resource provider reported as contribution revenue?
(1) the recipient organization is granted variance power by the resource provider or
(2) the recipient organization and the beneficiary are financially interrelated organizations.
How should a nongovernmental not-for-profit organization report investments in its financial statements?
Fair value with gains and losses reported in the statement of activities
How are donations without restrictions reported on the Statement of Cash Flows for NFP?
Operating Activities
How are cash inflows with donor restrictions reported on Statement of Cash Flows for NFP?
Financing Activities
Also financing : income restricted for long term purposes
What is the standard setting body for NFP?
- Non-governmental non profits follow FASB standards
- Governmental non profits follow GASB standards
What are the 4 main categories of Not For Profits ?
- Hospitals and healthcare organizations
- Health care providers
- Colleges, universities, and other educational
- Voluntary health and welfare organizations
- promote health, but don’t provide healthcare
- American Cancer Society, Girl Scouts, fundraising for child welfare
- Other Non Profits -
- Everything else: churches, political parties, random
What are the functional classifications reported for NFP?
- Program services
- relate to mission of the organization
- activities that result in goods and services provided by organization
- Supporting Services
- Management and general
- fund raising (always support!)
- membership development
- Can be reported on:
- face of statement of activities
- notes to F/S
- separate F/S
The cash flows from operating activities section of the cash flow statement for a private, not-for-profit college using the indirect method would begin with:
Total changes in net assets
(this is equivalent to net income in the for profit world)
What are the criteria for collections to NOT be capitalized?
Works of art, historical collections, etc.
- Held for public exhibition
- protected and preserved
- subject to a policy that requires proceed of items sold to beused to acquire other items for the collection
If it does not meet this criteria, must be capitalized at fair value
When are donated services recognized as both an expense and a revenue?
contributed services that do not enhance nonfinancial assets are recognized when:
- S Specialized skills are required and possessed by the donor
- O Otherwise needed by organization
- M Measurable
- E Easily (at fair value)
When are conditional and unconditional pledges recognized as revenue?
- Unconditional Promises recorded at FMV when the promise is MADE
- Conditional Promises = Revenue when EARNED
- Revenue and Receivable ONLY once it becomes unconditional
- Multi-Year pledge - Record at NPV the date the pledge is made
- Pledge now - revenue
- Pledged in the future - donor restricted
- No bad debit in NFP - record the pledge net of any allowance
What is the difference between condtions and donor restrictions for NFP??
Conditional promises/pledges are subject to resolution of a contingency. Condition must be resolved before pledge can be recognized as income.
Restrictions are satisfied by the NFP by use of the donated resources
EX: Condition - Rich donor will give a pledge of $100K if you can get $10K of new donors
Restriction - This money is to be used to fund next year’s pledge drive
What are underwater endowments and how are they reported?
- Fair value of endowment has dropped below original gift amount
- Report accumulated losses as part of net assets with donor restrictions
- Disclose in the Statement of Financial Position:
- Fair value of funds
- Original endowmnent amount
- the amount of the deficiencies
