NFP Revenue Recognition (F8:M5)

Question 1

how are revenues from exchange transactions classified?

Answer 1

as increase in NA without donor restrictions
*think of it like commercial accounting, you provide a service and someone gives you an asset (typically cash) IN EXCHANGE and you record the corresponding rev

e.g., NFP college earns revenue through student tuition and fees

Question 2

there are two ways a contribution can be classified. what are they?

Answer 2

revenue if contribution is part of ongoing central activity of NFP

gain if contribution is incidental

Question 3

when is an unconditional pledge recorded as rev?

Answer 3

when promise is made

Question 4

donated collection items (art/treasures) are not required to be recorded by recipient NFP if what 3 conditions are met?

Answer 4

item is part of collection and held for public viewing

collection is preserved by org

proceeds from sale of donated items gets reinvested in other collection items

*same as govt

Question 5

if a NFP receives a contribution in Dec year 1, but the contribution is restricted until March of the next year, how should the contribution be recorded (and in what year)?

Answer 5

as income in year 1 and classified as contribution with donor restrictions, which increases NA with donor restrictions

Question 6

when should a conditional pledge be recorded as rev?

Answer 6

NEVER. recognized receivable and rev only when they become unconditional, which occurs when the conditions are met

Question 7

how is donated property recorded on the statement of financial position and statement of activities?

Answer 7

increase in assets; support (at FV)

asset (d)
contribution- support (c)

Question 8

what is the formula for patient service revenue?

Answer 8

gross patient service rev - charitable services

Question 9

what are the 3 revenue categories of NFP health care orgs?

Answer 9

patient service rev
other operating rev (includes donated supplies)
non operating rev (includes donated services)

Question 10

how do you determine whether to recognize donated services that do not enhance non financial assets? (SOME)

*remember, donated services that create or enhance non financial assets need not pass the SOME test to be recognized

Answer 10

Specialized skills are needed and possessed by donor

Otherwise needed by the org

Measurable

Easily (at FV)

Question 11

what is the only thing that reduces revenue from tuition and fees?

Answer 11

refunds (canceled classes)