SU 18: NFP Accounting

Question 1

characteristics that identify a not-for-profit as opposed to governments or business

Answer 1

• created by a group of individuals (not a government
• created to pursue a mission (not create profit)
• no power to levy taxes

Question 2

Regulatory authorities for NFPS

Answer 2

IRS (grants tax exempt status)
FASB (sets accounting standards)
AICPA Audit Guides (audit and accounting)
Applicable Agencies

Question 3

Funding sources for NFPs

Answer 3

• exchange transactions (sales and services)
• non-exchange funding (grants and endowments)
• hybrid (exchange + government funds)

Question 4

Why NFPs need reliable accounting

Answer 4

• economic viability to survive financially
• adhere to compliance requirements
• social implications: transparency leads to acceptance, trust, and respect for operations

Question 5

when does GASB have authority over NFP accounting

Answer 5

only for compliance standards regarding government grants and awards

Question 6

FASB intent in creating rules for government accounting

Answer 6

to keep NFP accounting similar to business accounting

Question 7

required categories for NFP net assets

Answer 7

AT LEAST
Donor- restricted
vs
unrestricted/ without donor restriction

(boards may also apply their own restrictions to previously unrestricted funds)

Question 8

Why might NFPs use segregated funds

Answer 8

• minimizes inappropriate use of donor-restricted funds
• facilitates reporting to grantors/ funding agencies

Question 9

How is NFP fund accounting different from government accounting

Answer 9

NFPs are not required to use fund accounting

all funds use full accrual

Question 10

JE for Board-designated restrictions of funds

Answer 10

DR Net assets without donor restrictions (unrestricted)
CR net assets without donor restrictions (restricted for X)

Question 11

JE for release of board-designated restriction of funds

Answer 11

DR Net assets released from restricted - restricted fund
Cr net assets- unrestricted fund

Question 12

JE for donor-restricted contribution

Answer 12

DR Cash
CR Revenue from restricted contributions - restricted fund

Question 13

JE Release of donor-restricted contributions

Answer 13

DR Net assets released from restriction -restricted fund
CR net assets- unrestricted fund

Question 14

Commonly used fund for NFP fund accounting

Answer 14

• Unrestricted
• Restricted
• Plant or PP&E
• Loans
• Endowments
• Annuity & life-income
• Agency (custodial)

Question 15

Types of restrictions

Answer 15

• restricted for specific purposes
• assets to be preserved (not sold)
• investments to be held for a specific term (time period)

Question 16

Consolidation of NFP funds

Answer 16

Consolidated under donor-restricted or unrestricted

Eliminate: inter-fund transfers, receivalbes, payables

Question 17

Budgetary accounting for NFPs

Answer 17

allowed but not required

Question 18

NFP revenue definition

Answer 18

Increases of net assets

arise from bilateral exchange transactions where the other party receives direct tangible benefits

Question 19

NFP non-exchange transactions

Answer 19

contributions - donor support

Question 20

How revenue is reported for NFPs

Answer 20

Increases in:
- Unrestricted assets
or
- Donor-restricted assets

Question 21

Types of donor-imposed restrictions

Answer 21

Purpose restrictions
Time restrictions
Permanent restrictions (income can usually be used)

Question 22

NBI

Answer 22

Non-business-related revenue for an NFP. May be taxable

income not used directly for the mission on the NFP

Question 23

Membership dues for NFPS

Answer 23

must be tracked separately if taken in

Question 24

JE Receipt of membership dues

Answer 24

DR Cash
CR Revenue Membership - unrestricted fund

Question 25

JE receipt of donor-restricted contribution

Answer 25

DR Cash
CR Contribution revenue - donor support with (x) restrictions

Question 26

Collectables contributed to NFP

Answer 26

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

Question 27

When are governments not required to capitalized or recognize as revenue contributed collectables

Answer 27

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

Question 28

“Pass-through” contributions to NFPs

Answer 28

Not recognized as revenue but rather booked as a liability due to the eventual beneficiary

Question 29

variance power

Answer 29

right to vary what is done with the contribution then legally the funds can be redirected for other purposes.

Question 30

When pass-through contributions must be recognized as revenue by NFP

Answer 30

• 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)