PMR - NPO Sectons

Question 1

Restricted Fund Method (NPO)

Answer 1

• Funds are segregated into one or more restricted funds, a capital asset fund, an endowment fund and a general fund
• Used by NPOs that have significant restricted contributions for programs or projects
• Allows users to better see financial statement elements that are restricted in their purpose and use
• Revenue is recognized in the fund to which it relates when it is received
  
  • Endowment contributions are recognized to the endowment fund
  • Unrestricted contributions are recognized to the general fund
  • Restricted contributions are recognized to the fund that they relate to.
• If there is no fund set-up, then restricted contributions are recognized in line with the deferral method.
• Reference: Accounting Standards for NPOs 4410*

Question 2

Deferral Method (NPO)

Answer 2

• Restricted contributions are deferred and recognized to income when related expenses are incurred
• Unrestricted contributions are recognized when they are received
• Endowment contributions are recognized as direct increases to net assets
• Contributed land is recognized as a direct increase to net assets
• Contributed capital assets are deferred and amortized into income over the useful life of the related asset
• Reference: Accounting Standards for NPOs 4410*

Question 3

Donated goods and services (NPO)

Answer 3

• Optional to record, but can only do so when:
  
  • A fair value can be reasonably estimated; and
  • When the goods and services are used in the normal course of operations and would otherwise be purchased

Reference: Accounting Standards for NPOs 4410.16

Question 4

Tangible Capital Assets (NPO)

Answer 4

• If contributed, record at fair value as of contribution date
• If average of annual revenues for current and preceding year is less than $500,000: entity can choose to:
  • Capitalize and amortize capital assets
  • Capitalize capital assets but do not record amortization
  • Expense capital asset purchases in the year occurred

Reference: Accounting Standards for NPOs 4431.03