SU 18: NFP Accounting Flashcards
characteristics that identify a not-for-profit as opposed to governments or business
- created by a group of individuals (not a government
- created to pursue a mission (not create profit)
- no power to levy taxes
Regulatory authorities for NFPS
IRS (grants tax exempt status)
FASB (sets accounting standards)
AICPA Audit Guides (audit and accounting)
Applicable Agencies
Funding sources for NFPs
- exchange transactions (sales and services)
- non-exchange funding (grants and endowments)
- hybrid (exchange + government funds)
Why NFPs need reliable accounting
- economic viability to survive financially
- adhere to compliance requirements
- social implications: transparency leads to acceptance, trust, and respect for operations
when does GASB have authority over NFP accounting
only for compliance standards regarding government grants and awards
FASB intent in creating rules for government accounting
to keep NFP accounting similar to business accounting
required categories for NFP net assets
AT LEAST
Donor- restricted
vs
unrestricted/ without donor restriction
(boards may also apply their own restrictions to previously unrestricted funds)
Why might NFPs use segregated funds
- minimizes inappropriate use of donor-restricted funds
- facilitates reporting to grantors/ funding agencies
How is NFP fund accounting different from government accounting
NFPs are not required to use fund accounting
all funds use full accrual
JE for Board-designated restrictions of funds
DR Net assets without donor restrictions (unrestricted)
CR net assets without donor restrictions (restricted for X)
JE for release of board-designated restriction of funds
DR Net assets released from restricted - restricted fund
Cr net assets- unrestricted fund
JE for donor-restricted contribution
DR Cash
CR Revenue from restricted contributions - restricted fund
JE Release of donor-restricted contributions
DR Net assets released from restriction -restricted fund
CR net assets- unrestricted fund
Commonly used fund for NFP fund accounting
- Unrestricted
- Restricted
- Plant or PP&E
- Loans
- Endowments
- Annuity & life-income
- Agency (custodial)
Types of restrictions
- restricted for specific purposes
- assets to be preserved (not sold)
- investments to be held for a specific term (time period)
Consolidation of NFP funds
Consolidated under donor-restricted or unrestricted
Eliminate: inter-fund transfers, receivalbes, payables
Budgetary accounting for NFPs
allowed but not required
NFP revenue definition
Increases of net assets
arise from bilateral exchange transactions where the other party receives direct tangible benefits
NFP non-exchange transactions
contributions - donor support
How revenue is reported for NFPs
Increases in:
- Unrestricted assets
or
- Donor-restricted assets
Types of donor-imposed restrictions
Purpose restrictions
Time restrictions
Permanent restrictions (income can usually be used)
NBI
Non-business-related revenue for an NFP. May be taxable
income not used directly for the mission on the NFP
Membership dues for NFPS
must be tracked separately if taken in
JE Receipt of membership dues
DR Cash
CR Revenue Membership - unrestricted fund
JE receipt of donor-restricted contribution
DR Cash
CR Contribution revenue - donor support with (x) restrictions
Collectables contributed to NFP
recorded at FMV on date received (date the title changes hand)
either - capitalized and depreciated
OR
- neither capitalized or recognized as revenue (subject to restrictions
When are governments not required to capitalized or recognize as revenue contributed collectables
If:
- held for public exhibition, education, or research
- held for public service (not financial gain)
- protected, kept unencumbered, cared for and preserved
- have a policy if sold the money must be used to acquire other collectables
“Pass-through” contributions to NFPs
Not recognized as revenue but rather booked as a liability due to the eventual beneficiary
variance power
right to vary what is done with the contribution then legally the funds can be redirected for other purposes.
When pass-through contributions must be recognized as revenue by NFP
- if donor is granted variance power
or - if recipient and beneficiary are financially interrelated (in which case recipient must use equity method and include beneficiary in the financial statements)
