F6 M3 Not For Profit Revenue Recognition Flashcards
(32 cards)
what are revenues from exchange transactions?
an entity earns a resource for providing a service. They are recognized when they are realized and earned and considered increases to net assets without donor restrictions.
examples of exchange transactions
1) student tuition and fees earned
2) patient service revenue
3) membership fees
what is a contribution?
a resource received unconditionally by donor
when is a contribution classified as revenue? when is it classified as a gain?
when it is part of major activities of not for profit
when it is incidental to purpose of not for profit
name barriers that indicate conditions to receiving a contribution (5)
1) meeting level of service
2) outputs or outcomes
3) matching
4) contingent upon an outside event
5) right of return
how are cash contributions reported?
as revenue or gains and increase to net assets without or with donor restrictions and at fair value
what are unconditional promises (pledges)?
a written or verbal promise to receive a contribution at some point. Recorded at fair value. More difficult to collect.
what are conditional promises (pledges)?
a contribution to occur at an uncertain point in time. Recognition occurs when conditions have been substantially met or becomes unconditional
what are good faith deposits?
conditional promise that is a refundable advance (a liability)
JE: Dr. Cash Cr. Refundable Advance (liability)
how are multiyear pledges treated?
at net present value; future collections treated as donor restrictions; difference between present value and amt collected is contribution revenue
when no donor restrictions are in place, what should companies use to report expiration of restrictions for contributions related to long-lived assets?
the placed-in service approach
explain the allowance for uncollectible pledges?
treated very similar to AR, where pledge is recorded net of allowance, except there is no credit loss (bad debt expense)
when should donated services be recorded as a contribution and expense/asset?
1) create or enhance a financial asset
2) specialized skills required by donor
3) otherwise needed by org.
4) measurable
5) easily at fair value
what are split-interest agreements? when are changes in value recognized? and how are they disclosed?
contributions of trusts or other arrangements to receive benefits shared with beneficiaries
changes in value recognized for amortization of discounts and revaluations
assets and liabilities and contributions from them disclosed in statement of financial position and statement of activities, respectively
how are split-interest agreements measured and displayed?
at fair value at date of acquisition; estimated based on present value of future distributions; displayed as donor restricted
how is volunteer recruitment treated as?
fundraising expenses
what are donated collection items and when are they not required to be recorded? What if requirements are not met?
they are contributed works of art or historical treasures
1) item for exhibition, education or research
2) item cared for by org.
3) proceeds of sale of item reinvested for other collectible items
recorded as revenue, capitalized as an asset and depreciated
extraordinary long-lived assets
work of art or historical treasure that has aesthetic, cultural or historical value preserved perpetually, and owner will preserve it continually making it undepreciable
how are donated materials recorded and what are their journal entries?
at fair value at date of receipt
Dr. Asset
Cr. Contribution-support
If would have paid for asset or service
Dr. Expense
Cr. Contribution
donated materials for beneficiary not recorded
amt received in excess of fair value is additional contribution
what are gifts-in kind?
nonfinancial gifts like land, buildings, materials, supplies etc. and recorded at fair value and disclosed on statement of activities
how are contributions without donor restrictions valued?
at present value of estimated future cash flows using discount rate; if paid in one year or less then it is at net realizable value
pledges without donor restriction initially restricted journal entry
Dr. pledge receivable-with donor restriction
Cr. ADA
Cr. contributions-donor restricted
pledges restricted journal entry when collected
Dr. cash-with donor restriction
Cr. pledge receivable-restricted
Dr. satisfaction of time restriction-with donor restriction
Cr. cash-with donor restriction
assets without restriction journal entry
Dr. cash-without donor restriction
Cr. satisfaction of time restriction-without donor restriction
