CHAPTER 8 Flashcards
(29 cards)
Statement of Activities: expenses are reported as a…
- Decrease in net assets without donor restriction (Generally)
- If board designated thats a specific type of expense for endowment or just for future board designated expenses
NFP contribution revenue (exchange transaction)
If the NFP gives something in return to a donor for a contribution, the contribution revenue is calculated as follows
Contribution Received ($) (Less: FMV of the asset/service exchanged) Contribution Revenue (to the NFP)
Cash provided by operating activities
Net Income
- increase in A/R
+ increase in A/P
= cash flow from operating activities
IFRS: Dividends paid may be in operating activities
Anti-dilution Rule
Basic EPS is supposed to be higher than Diluted EPS therefore anything that causes it to increase wouldn’t be used
Amortization of a Bond Discount (Indirect Method)
Part of operating activities (added back to reflect the difference in interest expense and cash paid)
JE
Interest Expense xxx
Cash xxx
Bond Amortization xxx
Indirect Method Formula
Net Income
+ Depreciation Expense (not change in A/D)
+ Gain on the sale of equipment
= Net Changes in Operating Activities
*ignore changes in equipment and notes payable
Functional Classifications
Program- education/research/patient care/ labor negotiations, training, child care
Support
Fundraising
Administrative Expenses
Membership Development
EPS (General)
- Income from CO/Net Income = face
- Discontinued Operations = face or notes
- Contingent shares may be included if criteria are met
- Don’t disclose CF/Share BUT MUST INCLUDE EPS or else need to restate FS
Basic EPS (contingent shares may be included if criteria are met)
= Income available to CS/ WACSO
Income Available to CS
1) subtract out div declared for the current period PS (non-cumulative)
2) if cumulative subtract out only the div accumulated and IGNORE CURRENT PAID
WACSO
- stock splits/dividends retro actively & restate any prior years as well (there is an alternative method to WACSO)
Diluted EPS (General)
- applies to warrants, options, contingent shares, convertible preferred stock/bonds
- ONLY DILUTIVE (cant increase EPS)
- apply treasury stock method (in the money)
Options/Warrants (in the money)
- Additional shares = # of shares stated - (# of shares x exercise/avg market price)
- MUST BE IN THE $
Convertible Bonds (NET OF TAX, ANTI-DILUTIVE RULES APPLY)
1) add back interest expense (NET OF TAX) to the numerator
2) add # of CS converted
Convertible Preferred Stock (NOT NET OF TAX)
1) adjust the numerator (add back preferred stock)
2) add # of CS converted
Statement of CF Sections
Operating
- current A/L, I/S, goods and services to customers
Investing
- PPE/non-current assets
- Other entities: loans, bonds payable, AFS, HTM, acquiring another entity
Financing
- debt (non-current liabilities), equity, current portion of LT Debt, Current NP, PAYMENT OF PRINCIPAL NOT INTEREST (thats operating)
Direct Method
- supplemental schedule reconciliation
- GAAP requires rec NI to Net CF from Operating Activities (IFRS DOESNT)
1) Cash Received from Customers
= Revenue + Indirect Method (A/R and unearned Revenue)
2) Interest/Dividends Received
3) Other Operating Cash Receipts (lawsuit/insurance)
4) Cash from Trading Securities
5) Cash Paid to Suppliers
= COGS + Direct Method (Inventory/AP)
6) Cash Paid to Employees
= Salaries/Wages Expense + Direct Method (wage payable)
7) Interest and Income Taxes Paid
8) Cash paid for TS
9) Other Operating Cash Payments (SGA)
= Prepayments/Accrued Liabilities (Direct Method)
Indirect Method (CLAD)
- separately disclose interest and income taxes PAID (MEANING CASH)
- ignore cash received from customers … etc
Net Income
+ Depreciation/Amortization, Losses, GW impairment
- Gains/Amortization of Bond Premium, EQUITY EARNINGS
*APPLY INDIRECT METHOD TO CURRENT A/L
= Cash Flow from Operations
*Allowance for UA = current liability treatment
Statement of CF (General Notes)
- Reconcile beg cash/ce to change in the period
- CF/Share disclosure isn’t required (GAAP)
- CF/Share = PROHIBITED UNDER IFRS
- Bank overdrafts = CE (IFRS)
- SP - NBV = Gain
- DONT REPORT CASH EQUIVALENTS ON THE STATEMENT OF CF
- Disclose non-cash investing and financing (fixed asset for stock, bonds to equity, capital lease obligation, exchange noncash assets)
Classification of Interest/Dividends/Taxes
Interest received/ paid = operating (GAAP)
Dividends received = operating (GAAP)
Dividends paid = financing (GAAP)
Taxes paid = operating (GAAP) *
IFRS: received = investing
IFRS: paid = financing
*Taxes can be ANYTHING
NFP: FS
Statement of Activities, Statement of Financial Position (NA w or w/o DR), Statement of Cash Flow
NFP: Expenses
Functional: Program or Support (Fundraising, mgt/General, Membership Development) on the Statement of Activities
Natural: by specific type ( disclose in the notes by function analyzed by natural)
*Grants to other org and Depreciation are EXPENSES
Statement of Activities
Uses the accounts Net Assets W DR or w/o DR
Reclassification of Restriction (When satisfaction of a restriction it gets released so NA w DR decreases and NA without DR increases)
JE
Satisfaction of program restriction w DR xxx
Satisfaction of Program Restriction w/o DR xxx
(To record the satisfaction of restriction)
*satisfied in the same period = w/o restriction if same acc policy
Program Expense xxx
Program Revenue xxx
(To record the use of resources - earned when spent)
***Expenses decrease net assets w/o dr
NFP: Statement of CF
Operating = law suits/insurance/contributions w/o dr, program, dividend/interest income, Board restricted
Investing = art works, sale of assets, used to reinvest in equipments
Financing = borrowing, mortgage pmts, contributions restricted to acquire/improve/construct PPE and other long lived assets
*Disclose non- cash transactions: contributed secs, CIP, other fixed assets (AP), non-cash debt refinancing
Contributed collections NOT capitalized dont have G/L
NFP: Revenue Recognition
- increases net assets w/o DR
- student tuition/fees, patient service revenues, membership fees
- **Conditional = external, restricted = resources can be spent to release restriction
- Unconditional Contributions = FV
- Conditional Contributions = DONT RECOGNIZE
Good Faith Deposits (Agency)
Cash xxx
Refundable Advance xxx
Donated Services (JE)
Expense/Asset (FV) xxx
Contribution (FV) xxx
EXPENSE: enhance/create a non-financial asset or meet, specialized, otherwise purchased, measure, easily (SOME)
FMV - deeply disc charge = contribution revenue (applies to fundraising premiums as well)
