NFP Financial Reporting (F8:M3-4)

Question 1

what standard do NFPs follow: FASB or GASB?

Answer 1

FASB

Question 2

what is the basis of accounting that NFPs use?

Answer 2

full accrual. FS do not present funds! that would be governmental accounting

Question 3

what are the 3 required FS for NFPs?

Answer 3

statement of financial position BS
statement of activities IS
statement of cash flows CF

Question 4

what are the 3 ways (locations) NFPs can report relationships between functional classifications and natural classifications of expenses?

Answer 4

statement of activities

schedule in notes to FS (usually this)

in a separate FS

Question 5

what is a functional classification and natural classification?

Answer 5

functional: program services and support services (management and general, fundraising, membership development)
natural: rent, utilities, int exp, etc.

Question 6

what are net assets without donor restrictions?

Answer 6

may be expended at discretion of governing board

*restrictions only come from the outside. internal board-designated funds are considered NA without donor restrictions!!!!

Question 7

in the statement of financial position, what are the ONLY TWO classifications under net assets?

Answer 7

with donor restrictions

without donor restrictions

A = L + NA

Question 8

what are the 3 required elements that must be presented in the statement of activities?

Answer 8

change in total NA (i.e., net income)

change in NA with donor restrictions

change in NA without donor restrictions

Question 9

donor-imposed restrictions that are met in the same fiscal year they are received may be recorded how?

Answer 9

as an increase in NA without donor restrictions (contribution revenue) because they are spent so quickly

Question 10

how are expenses classified in the statement of activities?

Answer 10

program services (primary activities)

support services (fundraising, admin, membership development)

Question 11

T or F, NFPs need to report expenses in the statement of activities by their functional classification and disclose the expenses in a natural classification by function in the notes to FS.

Answer 11

T

Question 12

FASB ASC 958 focuses on what?

Answer 12

basic information for the organization as a whole

Question 13

resources provided in conjunction with a conditional pledge represent a ___ ___ that is recorded as a ___.

Answer 13

refundable advance; liability

Question 14

do conditional promises represent receivable revenue or a net asset?

Answer 14

no, not until the conditions are met

Question 15

is a multi-year pledge classified as “with donor restrictions” or “without donor restrictions”?

Answer 15

with donor restrictions because of the implied time restriction

Question 16

what method must a NFP use when preparing a statement of CF?

Answer 16

either indirect or direct

*when direct method is used, a reconciliation IS NOT REQUIRED like it is with commercial entities

Question 17

where would proceeds from the sale of financial assets not restricted for LT purposes show up on a statement of CF for a NFP?

Answer 17

operating activities

Question 18

where would contributions restricted for long-lived assets and contributions restricted for endowment funds show up on a statement of CF?

Answer 18

financing activities

Question 19

is it possible to have expenses with donor restrictions?

Answer 19

NO!