Yellow Book Not For Profit

Question 1

Non Profits provide?

Answer 1

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.

Question 2

NFP focus is not on income production but on what?

Answer 2

On the entity as a whole

Question 3

What are the characteristics that distinguish it from a business enterprise?

Answer 3

• 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

Question 4

What are the two main categories of NFPs?

Answer 4

• 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.

Question 5

What are the three financial statements requried to be presented for NFP?

Answer 5

• Statement of Financial Position
• Statement of Activities
• Statement of Cash Flows

Question 6

Voluntary health and welfare organization are required to prepare what?

Answer 6

• Statement of Functional Expense

Other NFPs often choose to include this statement as well, but they are not required to include this statement.

Question 7

What is a Voluntary Health and Welfare Organization/

Answer 7

is one who receives most of its support from voluntary contributions and works to promote the general health and wellbeing of the general public.

Question 8

The Statement of Financial Position report on?

Answer 8

Reports on an aggregate view of the entity as a whole, rather than on disaggregated funds.

Question 9

in Statement of Financial Position, net assets should be classified into how many and what categories?

Answer 9

Into 3 categories

Unrestricted, Temporarily restricted and permanently restricted.

Question 10

What are Permanently Restricted Net Assets?

Answer 10

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.

Question 11

What are Temporarily Restricted Net Assets?

Answer 11

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.

Question 12

What are Unrestricted Net Assets?

Answer 12

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.

Question 13

Investments in Debt and Equity are carried at what value?

Answer 13

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*

Question 14

What does the Statement of Activities (Revenues and Expenses) report?

Answer 14

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.

Question 15

how is Statement of Activities presented?

Answer 15

Either a single column presentation or three columns for each class of net assets can be used.

Question 16

The change in net assets must be reported for each of the following:

Answer 16

• Unrestricted Net Assets
• Temporarily Restricted Net Assets
• Permanently Restricted Net Assets
• Total Change in Net Assets

Question 17

What is the main source of revenues for not for profits?

Answer 17

Contributions-these include all non reciprocal receipts of assets or services.

Question 18

Contributions may come in the form of:

Answer 18

• 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.

Question 19

Contributed Services will be recorded as a Revenues to the Not for Profit Organization if:

Answer 19

• 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

Question 20

When a donor contributes a service, what is the JE that’s made?

Answer 20

DR: Legal/Admin Expenses/etc.

CR: Contributed Revenue

Question 21

All expenses are reported how?

Answer 21

As unrestricted net asset.

Question 22

The cost of fund raising must be reported either:

Answer 22

On the face of the Statement of Activities

OR

In the Notes to the Financial Statements

Question 23

The costs of mailing are considered to be fund raising expenses unless all 3 of the following criteria are met:

Answer 23

• General audiance (mailings to prior donors are not general audience)
• Purpose (call to a specific action)
• Content (must be related to the management activities)

Question 24

What is an agency relationship?

Answer 24

• 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.

Question 25

what is the exception to Agency relationship?

Answer 25

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.

Question 26

What does Variance power mean?

Answer 26

Means that the Not For Profit receivng the Assets has the power to redirect the assets.

Record as a contribution rather than a liability.

Question 27

Contributions of art work collections or historical treasures DO NOT have to be recorded if they meet all of the following criteria:

Answer 27

• 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.

Question 28

If the collection is not recorded, it must be?

Answer 28

Disclosed in the notes

Question 29

if the collection is recorded, it will be recorded how and what’s the JE?

Answer 29

FMV

DR: Collection Assets

CR: Contribution Revenues

Question 30

For not for profits: what are the categories in statements of cash flows?

Answer 30

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Question 31

What method is used for statement of cash flows?

Answer 31

The indirect method or direct method (with reconciliation) may be used.

Question 32

Where are unrestricted girst included in statement of cash flows?

Answer 32

Operating activities

Question 33

when there has been a receipt of restricted contributions- permanent endowments and term indowments are included in what section of cash flows?

Answer 33

Financing activities along with the related dividend and interest income.

Question 34

Receitp of restricted contributions designated to prucahse equipment and LT investments are included in what sectino of the cash flows?

Answer 34

financing activities

Question 35

Use fo the restricted contributions to purchase equipment and or LT investerments are in what section of the cash flows?

Answer 35

Investing Activities.

Question 36

what are the standard settign authority for government related colleges and private intitutions?

Answer 36

GASB-authority over government related colleges

FASB-authority over private institutions

Question 37

What statements are required for colleges and universities?

Answer 37

Statement of Financial Position

Statement of Activities (various formats are accepatable)

Statement of Cash Flows (3 categories, may use direct or indirect)

Question 38

For colleges and universities- net assets are classified as:

Answer 38

Unrestricted

Temporarily Restricted

Permanently Restricted

Question 39

What are the standard setting authoritieis for Healthcare Organizations for government related hospitals and private hospitals?

Answer 39

GASB- Authority over government related hospitals (proprietary fund)

FASB-Private nonprofit hospitals & investor owned hospitals.

Question 40

What FSs do Healthcare Organizations need to present?

Answer 40

• 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.

Question 41

What is unique FSs that Healthcare Organizations need to report?

Answer 41

Report the Statement of Functional Expenses

Question 42

What are the 5 Split Interest Agreement Types?

Answer 42

• Charitable lead trust funds
• Perpetual trusts held by third parties
• Charitable remainder trusts
• Charitable gift annuities
• Pooled (life) income funds

Question 43

What is a Split Interest Agreement?

Answer 43

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.