Not-for-Profit Accounting & Reporting 2 - Support, Revenues, Contributions & Net Assets Flashcards
What are the 4 characteristics that must be met to be qualified as a Contribution?
1) Unconditional: if there is a condition, wait for it to be met
2) Nonreciprocal: If reciprocal it is an exchange transaction
3) Voluntarily made (eg. can’t be mandated by court)
4) Not an ownership investment
What types of contributions may be made to an organization?
1) Donated assets
2) Donated services
3) Pledges to Give: may include a “condition” or “restriction”
What does a “restriction” on a contribution effect?
WHERE the contribution revenue is reported NOT WHEN
But you can have a restriction on time
What impact does “condition” on a contribution have?
If a condition exists there is NO REVENUE RECOGNITION
Must wait for the condition to be met
If money was received with a condition, then its recorded as a liability
How do you classify a “temporary restriction” met in the same period as the donation?
Can be treated as NOT having a Temporary Restriction ie an unrestricted support, record a reclass from temp to unrestricted This happens particularly with Purpose restrictions
At what value are donated assets, other than cash, recorded ?
Fair Value @ date of gift
What is an “Implied time restriction”?
1) If depreciable property is donated the entity can adopt this policy to record the donation as temporarily restricted support as opposed to unrestricted support.
2) Every year the depreciation of the asset is recorded another entry is made to reclass the depreciation amount from “Temporarily Restricted Net Assets” to “Unrestricted Net Assets”
Why is the “Implied time restriction” a beneficial option for Not for Profits?
If an NPO were to receive a large depreciable asset and have to classify it all under unrestricted, regular donators may see that large unresticted net asset and be less inclined to donate. Thus the “implied time restriction” allows Not for Profits to recognize unrestricted over time
What is the main revenue for Healthcare Organizations?
Patient service revenues
- Daily patient services
- Other nursing services
- Other professional services
Premium Fees: based on agreement to provide services for specific fee (eg. medicare, hmos)
Resident Service Fees: eg. equipment rentals
Other Revenues: derived from ongoing activity other than patient services
How do you calculate Net Patient Revenue?
Gross Patient Service Revenue Less: Charity Services Contractual Adjustments Uncollectable accounts (bad debts)** **Public ie governmental includes bad debts net of Gross Patient Service Revenues but Private reports as a separate line item expense
What is “charity care” in respect to Healthcare Organizations?
Services to persons who have demonstrated that they are unable to pay
Never expected to be collected
Not recognized as revenue, receivable or bad debt
Is the “net assets” term allowed by governmental entities?
No, its referred to as net position
How is the equity section of the statement of financial position organized on for NPO hospitals vs Public (governmental) hospitals?
NPO :
Unrestricted net assets
Temporarily restricted net assets
Permanently restricted net assets
Governmental:
Net investment in capital assets
Restricted net position
Unrestricted net position
What is required for Governmental hospitals Statement of Cash Flows under GASB?
Use of the direct method
Four categories (similar to proprietary funds)
- Operational
- Investing
- Capital Financing
- Non-Capital Financing
No distinction made between unrestricted and restricted cash flows
How do you calculate Tuition Revenue for Colleges & Universities?
Tuition revenues are recorded at gross (less any tuition refunds)
&
Reported net of uncollectible accounts and scholarship allowances*
- scholarship expenses however should be reported reported as a separate expense eg. work job payments
- tuition waivers TO EMPLOYEES are also reported separately as an expense item
