Study Unit 1.3 - Aspects of Not-for- Profit Reporting Flashcards
True of False? According to the Nonprofit Almanac 2001, The not-for-profit sector of the U.S. Economy is significant, because those not-for-profit organizations registered with the IRS, grew by 19% from 1999 to 2009. And as of 2009, Public Charities and Private Foundations had combined revenues of $1.87 Trillion and Reported Assets of $4.3 Trillion.
True
What 4 ways can you distinguish the Characteristics of Not-for-Profit Entities.
1) They receive Significant Resources from providers who do not expect to receive repayment or proportionate economic benefits.
2) They have operating purposes than to provide goods and services at a profit.
3) Not-for-Profit Entities have no single indicator of performance like net income. Thus other performance indicators are needed.
4) They lack defined ownership interests that can be:
(a) Sold, transferred, or redeemed or
(b) entitle an owner to distributions upon liquidation of the entity.
What is a key difference between a not-for-profit Entity and business entity?
Not-for-Profit entities have transactions that are infrequent in businesses, such as grants and contributions.
Three part question: 1) Is is true than an entity may possess some of the characteristics of a Not-for-Profit Entity but not others? 2) List some examples of such entities. 3) Lastly for those entities, which reporting objectives may be more appropriate?
It’s TRUE
That an entity can possess some of the characteristics of a not-for-profit entity but not others.
Examples include:
1) Private not-for-profit hospitals and
2) Schools that receive small amounts of contributions but are essentially dependent on debt issues and user fees.
For such entities, the reporting objectives of business entities may be more appropriate.
The FASB identified 4 key stakeholders groups that are interested in financial reporting by non business entities: List those 4 users?
1) Resource Providers
2) Constituents
3) Governing and oversight bodies
4) Managers
How are the primary concerns of stakeholders of not-for-profit entities different from the primary concerns of the stakeholders for for-profit entities?
The difference is:
The stakeholders of for-profit entities are primarily concerned about financial returns.
while.. the Stakeholders for not-for-profit entities are primarily concerned about the services rendered and the entity’s continuing ability to render those services.
The objectives of Not-for-Profit entities include providing information that is: List the 7 key elements that make that provided information useful?
The objectives included providing information that is:
1) Useful in making resource allocation decisions
2) Useful in assessing services and ability to provide services
3) Useful in assessing management stewardship and performance
4) About economic resources, obligations, net resources, and changes in them
5) About factors that may affect an organization’s liquidity
6) Consisting of explanations and interpretations to help users understand financial information presented.
How are non-business entity’s usually evaluated? and Why?
Non-business entities are usually evaluated in terms of management stewardship.
Because:
Not-for-Profit Entities normally doesn’t have any single indicator of performance that compares to a business’ enterprises indicator of performance, which is profits / net income.
What does NFP entities stand for?
Not-for-Profit entities
