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CPA - FAR > F9: Not for Profit Organizations > Flashcards

F9: Not for Profit Organizations Flashcards

1
Q

not for profit entities are defined by FASB or GASB?

A

FABS

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2
Q

what are the four frequent industries that include organizations for NFP accounting?

A

1) health care
2) education
3) voluntary health and welfare - red cross, united way
4) other private (not gov) NFP orgs - cemetery, fraternal, labor unions, libraries, AICPA

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3
Q

what is the basis of accounting for NFP entities?

A

full accrual

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4
Q

what are the required F/S for NFP?

A

1) statement of financial position
2) statement of activities
3) statement of CF
4) statement of functional expenses, which is REQUIRED for voluntary health and welfare orgs, and encouraged for other orgs

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5
Q

what are the components of statement of financial position?

A

1) assets
2) liabilities
3) net assets (equity)

NOT funds, fund balance, retained earnings

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6
Q

what are the three elements of net assets?

A

PUT

1) unrestricted net assets
2) temp restricted net assets
3) perm restricted net assets

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7
Q

what is unrestricted net assets?

A

available to finance general operations of the particular org, and may be expended at the discretion of the governing board

** internal board designated funds considered unrestricted, not restricted

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8
Q

what are temp restricted net assets?

A

similar to perm restricted net assets, EXCEPT donor imposed stipulations either expire by passage of time or can be fulfilled and removed by actions of the org

  • temp restricted net assets should not be displayed as a deficit
  • any over expenditure of temporarily restricted net assets should be classified as a reduction of UNRESTRICTED net assets
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9
Q

what are perm restricted net assets?

A

result from contributions and other inflows of assets who use is LIMITED by donor-imposed stipulations that NEITHER expire by passage of time NOR can be fulfilled or otherwise removed by actions of the organization

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10
Q

what are the elements of statement of activities?

A

1) change in total net assets
2) change in unrestricted NA
3) change in temp restricted NA
4) change in perm restricted NA

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11
Q

what is “purpose”, “time”, and “acquisition of plant” types of temporarily restricted net assets?

A

1) purpose - money must be spent as donor stipulates
2) time - assets restricted until a fixed period passes
3) acquisition of plant - assets are restricted until land is purchased

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12
Q

what are contributions with donor imposed restrictions recorded as?

A

restricted revenue in the period they are received

increase temp or perm restricted net assets

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13
Q

what happens when a donor restriction is satisfied?

A

reclassification is reported on the statement of activities

reclassifications are items that simultaneously increase one net asset and decrease another

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14
Q

if donor imposed restrictions that are met in the same period they are received, can the org record this as unrestricted support (contribution revenue)?

A

yes, as long as the org discloses and consistently applies this method

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15
Q

what are expense classifications in the statement of activities?

A

1) program services
ex: unis, union, day care, hospitals
2) support services
ex; fundraising, admin, management and general, membership development
3) combined costs
ex: funding and education

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16
Q

how are expenses reported in the statement of activities ?

A

reported as decreases in UNRESTRICTED net assets

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17
Q

can both indirect and direct method be used for stmt of cash flows for NFP?

A

yes

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18
Q

what are the different activities included in cash flow statement?

A

similar to commercial accounting

1) operating activities
2) financing activités
3) investing activities

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19
Q

what is included in operating activities in CF?

A
  • include applicable agency transactions
  • when using DIRECT method, operating activities should be reported by major class of gross receipts (including contributions, program income, and interest income or dividend income from investments)
  • include receipts of unrestricted resources designated by governing body to be used for long lived assets
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20
Q

what is included in financing activities in CF?

A
  • cash transactions related to BORROWING
  • cash transactions related to certain RESTRICTED contributions
    ex: increases to endowment, purchases of assets, annuity agreements
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21
Q

in CF statement, what activity is disbursements of restricted contributions for either temporary investments of the purpose for which they were intended classified as?

A

“investing” activity

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22
Q

what are the functional classifications for functional expenses?

A

1) program support
2) fundraising expenses
3) management and general

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23
Q

what are program support expenses?

A

DIRECTLY relate to org’s program

24
Q

what are fundraising expenses?

A

cost of transmitting appeals to the public and salaries of personnel connected with fundraising campaigns

  • unsolicited merchandise sent out
25
Q

what are “resource inflows” for NFP organizations?

A

either

1) revenue
2) other support

revenue - exchange transactions in which the NFP organization earns resources in exchange for a service performed (ex: fees)

other support - operating income that is donated (contributed) or provided in some way that is anticipated as part of the central ongoing activities of the organization

26
Q

what is a contribution?

A

UNCONDITIONAL transfer of cash or assets (collection is certain) to a new owner (title passes) in a manner which is voluntary (donor under no obligation to donate) and is nonreciprocal (donor gets nothing in exchange)

27
Q

when should a cash contribution be recognized?

A

received = revenue

measured at FV at date of gift

28
Q

when should an unconditional promise be recognized?

A

pledge = revenue

record at FV when promise is made
can be written or verbal
verbal pledges should be documented by organization internally and may be more difficult to collect

29
Q

when should a conditional promise be recognized?

A

earned = revenue

since it depends on future and uncertain event
recognition not earned until conditions are substantially met and promise becomes UNCOnditional

30
Q

are conditions synonymous with restriction?

A

NO

31
Q

when are multiyear pledges recognized?

A

NPV at date the pledge is made

1) now = revenue
2) future collections = temporarily restricted revenue

the difference between previously recorded PV and the current amount collected is considered CONTRIBUTION revenue, not interest income

32
Q

when is allowance for uncollectible pledges recognized?

A

= NRV (full accrual)

33
Q

what are split interest agreements?

A

donor contributions of trusts or other arrangements under which the NFP organization receives benefits that are SHARED with other beneficiaries

34
Q

how are split interest contributions recognized?

A

measured at FV at date of acquisition

estimated based on PV of estimated future distributions

displayed as TEMP restricted (unless there is perm restriction established by donor)

35
Q

what is the difference in unrestricted/restricted and conditional/unconditional?

A

NET ASSET CLASSIFICATION = unrestricted / restricted

REVENUE RECOGNITION = conditional / unconditional

unconditional pledges are assured of collection and may be recognized as either restricted or unrestricted

36
Q

how should received donated services by NFP be recorded?

A

recorded as contribution revenue and EXPENSE at FV if the services meet the following criteria:

1) they enhance or create a nonfinancial asset (ex: land, building, inventory)
2) they required specialized skills that the provider possesses and would otherwise have been purchased by the org

37
Q

what is the acronym to remember when contributions of services should be recognized?

A

SOME.

S = specialized skills required and possessed by donor 
O = otherwise needed by organization
M = measurable
E = easily (at FV)
38
Q

expenses associate with solicitations of contributions of volunteer assistance are classified as what type of expense?

A

fundraising expense regardless of whether the volunteer assistance meets the “SOME” criteria for in-kind recognition

39
Q

how are donated collection items recorded?

A

not required but only if meet the requirements

40
Q

what are the requirements not need to record donated collection items?

A

1) item is part of a collection, which is held for public viewing, exhibition, education, or research
2) collection is cared for
3) org has a policy that requires any proceeds from SALE of donated items to be reinvested in other collection items

41
Q

what happens if the requirements for not needing to record donated collection items are NOT met?

A

donation must be recognized as an asset and revenue

42
Q

how should donated materials be recorded?

A

at FV on the date of receipt if the FV can be objectively determined

DR asset
CR contribution - support

43
Q

what included in investing activities in CF?

A
  • proceeds from sale of art or purchases of works of art
  • include investment in equipment
  • proceeds from sale of assets that were received in prior periods and whole sale proceeds were restricted to investment in equipment
44
Q

what is the statement of functional expense?

A

mandatory for voluntary health and welfare organizations but OPTIOnal for other NFP

45
Q

how are unrestricted contributions recorded?

A

unconditional promises to contribute in the future are reported as restricted support (implied time restriction) at the PV of the estimated future CF’s using a discount rate commensurate with the risks involved even if their ultimate use is unrestricted.

46
Q

what is the JE to record unrestricted pledges (with time restriction)

A

DR pledge receivable - temp restricted
CR allowance for doubtful accounts
CR contributed revenue - temp restricted

47
Q

what is the JE when unrestricted pledges are collected?

A

DR cash - temporarily restricted
CR pledge receivable - temp restricted

DR satisfaction of time restriction - temp restricted
CR cash - temp restricted

48
Q

what is the JE when the unrestricted pledge restriction is released?

A

DR cash - unrestricted

CR satisfaction of time restriction - temp restricted

49
Q

what is the JE to record restricted contributions ?

A

DR pledge receivable - temp restricted
CR allowance for doubtful accounts
CR restricted revenue - temp restricted net assets

50
Q

what is the JE to record when receivable of restricted contributions is collected?

A

DR reclassification - satisfaction of restriction

CR cash / restricted net assets

51
Q

what is the JE to record the restricted contributions being released and becoming unrestricted net assets?

A

DR unrestricted net assets
CR reclassification - satisfaction of restriction
DR operating expense
CR cash/unrestricted net assets

52
Q

what are agency transactions?

A

agency transactions consist of resources received by the NFP which the NFP has LITTLE or NO discretion or variance power

results in an asset and liability

53
Q

what are gifts in kind?

A

these are non cash contributions - they are measured at fair values

54
Q

gifts in kind - what is the difference between FV at time of donation and FV at time of sale accounted as?

A

additional contribution

55
Q

what are exchange transactions?

A

these are reciprocal transfers in which each party receives and sacrifices something of approx equal value

56
Q

for exchange transaction contributions, how do you (generally) calculate contribution revenue?

A

amount transferred

= contribution revenue

57
Q

the cost of premiums given to potential donors as part of a fundraising appeal is classified as?

A

fundraising expense

CPA - FAR (8 decks)

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