Yellow Book Not For Profit Flashcards
Non Profits provide?
Socially desirable services without the intention of realizing a profit. They are typically financed through user charges, contributions from donors, investment income, and government grants.
NFP focus is not on income production but on what?
On the entity as a whole
What are the characteristics that distinguish it from a business enterprise?
- Contributions of significant amounts from parties who do not intend to receive a comparable return
- Operating purpose other than to provide goods or services at a profit
- Absence of ownership interests like those of a business enterprise
- Not owned or controlled by a government
What are the two main categories of NFPs?
- Governmental- governed by the GASB-public colleges and universities, government hospitals, government museaums
- Nongovernmental-governed by the FASB- private colleges and universities, private sector health care entities operated by religious or other nonprofit entities, voluntary health and welfare, performing arts, museaums, labor unions.
What are the three financial statements requried to be presented for NFP?
- Statement of Financial Position
- Statement of Activities
- Statement of Cash Flows
Voluntary health and welfare organization are required to prepare what?
- Statement of Functional Expense
Other NFPs often choose to include this statement as well, but they are not required to include this statement.
What is a Voluntary Health and Welfare Organization/
is one who receives most of its support from voluntary contributions and works to promote the general health and wellbeing of the general public.
The Statement of Financial Position report on?
Reports on an aggregate view of the entity as a whole, rather than on disaggregated funds.
in Statement of Financial Position, net assets should be classified into how many and what categories?
Into 3 categories
Unrestricted, Temporarily restricted and permanently restricted.
What are Permanently Restricted Net Assets?
These include contributions of land and collections of art to be preserved and not sold. It also includes contributions which the donor has specified are to be permanently invested-endowments.
What are Temporarily Restricted Net Assets?
These contributions are designated by the donor as to how they may be used by the organization and will remain here until the criteria is met- at this point they will be reversed from the restriction.
What are Unrestricted Net Assets?
These may inlcude revenues from services or goods, unrestricted contributions, interest and dividends on investments- including income earned on permanently restricted investments as well as realized and unrealized gains on investments.
Investments in Debt and Equity are carried at what value?
Carried at FV on the Statement of Financial Position, with unrealized gains and losses being reported on the Statement of Activities in the appropriate net asset class (unrestricted, temp restricted, permanently restricted)
*This does not apply to investments under the Equity Method*
What does the Statement of Activities (Revenues and Expenses) report?
This statement reports the changes in net assets of the period in each of the net asset categories: Unrestricted Net Assets, Temporarily Restricted Net Assets, and Permanently Restricted Net Assets.
how is Statement of Activities presented?
Either a single column presentation or three columns for each class of net assets can be used.
The change in net assets must be reported for each of the following:
- Unrestricted Net Assets
- Temporarily Restricted Net Assets
- Permanently Restricted Net Assets
- Total Change in Net Assets
What is the main source of revenues for not for profits?
Contributions-these include all non reciprocal receipts of assets or services.
Contributions may come in the form of:
- Contribution (cash, other assets, services, or cancellation of a liability)
- An unconditional promise to give is recognized when the promise is MADE
- Conditional Promises- revenue is dependent upon some specified uncertain future event. Revenue is not recognized until condition is met.
- Contributions may be in the form of money or an asset- Assets FMV
- Restrictions-restriction is placed by the donor on the use of the contributions.
Contributed Services will be recorded as a Revenues to the Not for Profit Organization if:
- The service creates or enhances non financial assets
OR
- Requires specialized skills and is provided by someone with that skill, and would have been purchased if not donated.
Rvenue should be recorded at teh time the service is contributed at its FMV
When a donor contributes a service, what is the JE that’s made?
DR: Legal/Admin Expenses/etc.
CR: Contributed Revenue
All expenses are reported how?
As unrestricted net asset.
The cost of fund raising must be reported either:
On the face of the Statement of Activities
OR
In the Notes to the Financial Statements
The costs of mailing are considered to be fund raising expenses unless all 3 of the following criteria are met:
- General audiance (mailings to prior donors are not general audience)
- Purpose (call to a specific action)
- Content (must be related to the management activities)
What is an agency relationship?
- An agency relationship exists when a not for profit receives an asset for which they have NO control over its usage.
- The asset will be passed through the Not for Profit to a beneficiary
- The Not for Profit is acting as an agent for this transaction- NO revenue is recorded- instead, and Asset/Liability will be recorded.
what is the exception to Agency relationship?
Exception to this exists if the Not For Profit organization receiving the asset is granted “Variance Power” by the donor or if the Not for Profit is financially interrelated ot the Beneficiary Organization.
What does Variance power mean?
Means that the Not For Profit receivng the Assets has the power to redirect the assets.
Record as a contribution rather than a liability.
Contributions of art work collections or historical treasures DO NOT have to be recorded if they meet all of the following criteria:
- The collection is for public expedition, education or research
- The collection is protected and preserved
- When the collection is sold, the proceeds may only be used to purchase another collection.
If the collection is not recorded, it must be?
Disclosed in the notes
if the collection is recorded, it will be recorded how and what’s the JE?
FMV
DR: Collection Assets
CR: Contribution Revenues
For not for profits: what are the categories in statements of cash flows?
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
What method is used for statement of cash flows?
The indirect method or direct method (with reconciliation) may be used.
Where are unrestricted girst included in statement of cash flows?
Operating activities
when there has been a receipt of restricted contributions- permanent endowments and term indowments are included in what section of cash flows?
Financing activities along with the related dividend and interest income.
Receitp of restricted contributions designated to prucahse equipment and LT investments are included in what sectino of the cash flows?
financing activities
Use fo the restricted contributions to purchase equipment and or LT investerments are in what section of the cash flows?
Investing Activities.
what are the standard settign authority for government related colleges and private intitutions?
GASB-authority over government related colleges
FASB-authority over private institutions
What statements are required for colleges and universities?
Statement of Financial Position
Statement of Activities (various formats are accepatable)
Statement of Cash Flows (3 categories, may use direct or indirect)
For colleges and universities- net assets are classified as:
Unrestricted
Temporarily Restricted
Permanently Restricted
What are the standard setting authoritieis for Healthcare Organizations for government related hospitals and private hospitals?
GASB- Authority over government related hospitals (proprietary fund)
FASB-Private nonprofit hospitals & investor owned hospitals.
What FSs do Healthcare Organizations need to present?
- Balance Sheet
- Most use classified BS- exception: continuing care communities
- Net assets must be classified as Unrestricted, Temporarily Restricted, and Permanently Restricted.
- Statement of Operations
- Statement of Changes in Equity
- Statement of Cash Flows- use operating, investing and financing categories, the direct or indirect format is acceptable.
What is unique FSs that Healthcare Organizations need to report?
Report the Statement of Functional Expenses
What are the 5 Split Interest Agreement Types?
- Charitable lead trust funds
- Perpetual trusts held by third parties
- Charitable remainder trusts
- Charitable gift annuities
- Pooled (life) income funds
What is a Split Interest Agreement?
A not for profit organization may receive a contribution through a trust agreement in which the not for profit as well as another beneficiary will receive benefits. In general, the not for profit will record its proportionate share at the present value of future cash receipts.
