NINJA MCQs - Not-For-Profit Acctg Flashcards
The FASB Accounting Standards Codification encourages the use of standard terminology: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets
However, other labels exist and may be used. If other labels are used, the amounts of the three categories need to be clear and meaningful captions are necessary
Information about amounts set aside by the board, such as for a voluntary endowment, are useful and may be presented on the face of the financial statement
The term “net assets” is encouraged by the FASB Accounting Standards Codification; further, the components could be identified in terms of donor restrictions and the unrestricted component could be subdivided into “board designated” and “undesignated.”
May a not-for-profit pool its’ investments?
A not-for-profit entity may pool its investments, including those from contributions with different kinds of restrictions, for portfolio management
When a pool is established, proportional values are initially assigned based on cash amounts placed in the pool. Investment income and realized and recognized, unrealized gains and losses are later assigned based on the underlying facts and circumstances, board policy, donor requirements, and relevant legislation
Financial statements of a not-for-profit entity focus on
Entity as a whole
A not-for-profit entity may opt not to capitalize works of art, historical treasures, and the like as long as the items meet the definition of collection items: held for exhibition, protected, and preserved, with a policy that requires sales only for acquisition of other collection items. Capitalization means an addition to both sides of the accounting equation, assets and equities. If the collection is not capitalized, there is no amount included in equities or net assets. However, the existence of the collection, including the donated painting, cannot be disregarded and should be referenced by…?
a note describing the collection must be referenced on a line on the FACE of the FINANCIAL STATEMENT
Support services include
Fundraising
and,
Management and general
Not-for-profit entity’s statement of activities should report the net change for net assets
Changes in unrestricted net assets
Changes in temporarily restricted net assets
Changes in permanently restricted assets
Which of the following classifications is required for reporting of expenses by all not-for-profit entities?
Expenses to be reported by functional classification (i.e., program services, management, fundraising, etc.).
Only those not-for-profits that are voluntary health and welfare entities must augment the functional classification of expenses that appears in the statement of activities with a natural classification of expenses, displayed in a matrix format, that is shown in a separate document, a statement of functional expenses.
For a not-for-profit hospital, what revenues are classified as “other revenues”?
Revenues other than patient service revenues, such as revenues from educational programs, would be considered “other revenues.”
Gifts and contributions would not be considered operating revenues.
Private not-for-profit hospital
Bad debt expenses does not affect private not-for-profit hospital do not include
Charity care is not recognized as revenue because service provided without expectation of payment
Endowments decrease in value of investment affects
the permanently restricted net assets
Contributions are reported at
Net Realizable Value
Unconditional contributions, whether promised or received as cash,
recognized as revenue in the period received
In a not-for-profit, investment revenues can be reported
net of investment fees
If a not-for-profit chooses not to capitalize works of art, historical treasures, etc. then….?
A not-for-profit entity may opt not to capitalize works of art, historical treasures, and the like as long as the items meet the definition of collection items: held for exhibition, protected, and preserved, with a policy that requires sales only for acquisition of other collection items.
Capitalization means an addition to both sides of the accounting equation, assets and equities. If the collection is not capitalized, there is no amount included in equities or net assets.
However, the existence of the collection, including the donated painting, cannot be disregarded and a note describing the collection must be referenced on a line on the face of the financial statement.
If all conditions (part of collection for public viewing, item is protected by not-for-profit, if not-for-profit is required to reinvest sale proceeds in other collection items) are not met, then donation is recorded as a REVENUE AND ASSET
Board designated endowment
an investment fund created by a not-for-profit entity’s (NFP’s) governing board by designating a portion of its unrestricted net assets to be invested to provide income for a long but unspecified period (sometimes called “funds functioning as endowment” or “quasi-endowment funds”). A board-designated endowment fund contrasts with an endowment or investment fund that is formed from donor resources following donor wishes, and those resources are externally restricted.
