Not-for-Profit (CH. 9) Flashcards
What basis of accounting is used for Not-for-Profit organizations?
Uses FASB & full accrual accounting
What are the required Financial Statements for Not-for-Profit Orgs?
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
Statement of Functional Expenses
What’s a contribution?
Generally, the difference between the fair value of purchases and the amount transferred is classified as a contribution
When are cash contributions and unconditional pledges recognized as revenue?
Cash contributions and unconditional pledges are recognized as contribution revenue in the year in which the cash or pledge is received.
How are losses on the investments of a donor restricted endowment fund treated?
Generally, losses on the investments of a donor-restricted endowment fund (permanently restricted net assets for external reporting purposes) serve to reduce temporarily restricted net assets to the extent that donor-imposed temporary restrictions on net appreciation (cumulative losses minus gains) of the fund have not been met before the loss occurs. Any remaining loss reduces unrestricted net asset
What are the required finically statements for Not-for-Profit entities?
Rule: Not-for-profit corporations are required to produce the following financial statements:
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
Not-for-profit corporations are generally encouraged, but not required, to produce a Statement of Functional Expenses. Voluntary Health and Welfare organizations, a subset of all not-for-profit entities, are required to present a Statement of Functional Expenses.
How are board discretionary funds treated?
As unrestricted revenue
How are donated/ contributed services treated?
Contributed services are unrestricted. To be restricted, the donation must be restricted by the donors, creditors, grantors or laws or regulations.
How are unconditional promises treated?
A promise to contribute is restricted until conditions (collection) or eligibility requirements (date, etc.) have been satisfied.
What are the criteria for recognizing donated services?
SOME
The services creates or enhances non financial assets or:
- Specialized skill was required to deliver the service
- Otherwise needed service (would’ve been purchased by the org. Anyways)
- Measured Easily
When are restricted donations released from restriction?
Restricted donations are released from restriction when conditions or eligibility requirements have been satisfied.
When are not-for-profit organizations considered interrelated organizations?
In order for not-for-profit organizations to be financially interrelated as defined by FASB ASC 958-605, their relationship must share both characteristics: one organization must be able to influence the operating and financial decisions of the other AND have an ongoing economic interest in the net assets of the other.
How is donated property recognized?
Donated property is recorded at its fair market value and is recognized as support.
What are the expense categories used by not for profit entities?
program services and support services
What are program services?
Program services relate to functional expenses directly related to the mission of the organization
What are support services?
Support services summarize the functional expenses related to general and administrative costs, costs of membership development, and fundraising. Fundraising contemplates inducing potential donors to contribute to the entity.
What are examples of contributions to not-for-profit organizations?
Contributions to a non-profit include transactions which are unconditional (not requiring a future event to occur), non-reciprocal, voluntary, and not of an ownership investment.
How are conditional transactions treated in not-for-profit orgs?
conditional and not included in contributions. Conditional receipts are displayed as refundable advances (a liability).
What are quasi-endowment funds?
Quasi-endowment funds account for assets that have been internally designated by the institution for a specific purpose. Quasi-endowment funds would be displayed as unrestricted net assets on externally published financial statements.
How are donated goods treated?
Donated goods are recorded on the books of a not-for-profit organization. Goods that represent part of the ongoing central operations of the entity are reported as other operating revenue and ultimately operating expenses
What are the 3 functional classifications for expenses incurred by a nonprofit organization?
Program services, management and general cost, and supporting services (i.e fundraising)
How are donations/contribution of services recorded by not-for-profit organizations?
Contributions of services are recognized as earnings if (1) the service creates or enhances non-financial assets and (2) if the service require special skills and was delivered by a person having those skills, (3)Otherwise needed service would be purchased by the organization anyways, (4)Measured easily
What is the journal entry for donated services?
Dr. Expense
Cr. Contributions
What are the 3 most generally used revenue classifications for a hospital?
Patient service revenue (ie. patient services & other rev.)
Other operating revenue (ie. tuition form schools, educational programs, donated supplies & equipment, and specific purpose grants)
Non-operating revenue (ie. gains and or/losses including unrestricted interest and dividend income from investment activities, unrestricted grants, donated services, etc)
