FAR 1B1 SFP

Question 1

🏗️ What is included in the Plant Fund of an NFP?

Answer 1

✅ Equipment
❌ Fuel inventory is NOT included

Question 2

🏦 Where can board-designated net assets be reported?

Answer 2

✅ On the face of the balance sheet (BS)
✅ In the notes to the financial statements

Question 3

📑 What does “face of financials” mean?

Answer 3

✅ It refers to the balance sheet (BS) section
✅ If something like “board-designated net assets” can be shown on the face of financials, it means it must appear as a separate financial statement line item (FSLI) on the BS

Question 4

💰 When is a contribution receivable recognized?

Answer 4

✅ When it is unconditional OR when conditions are met
✅ Recognized in the period when the contribution is made

Question 5

📊 How are donated debt securities valued?

Answer 5

✅ At fair value (FV) at the end of the period
✅ Interest earned is added to determine the total change in net assets

Question 6

🎨 When can an NFP opt NOT to capitalize a donated work of art?

Answer 6

✅ If the item is:
1️⃣ Held for exhibition 🖼️
2️⃣ Protected and preserved 🏛️
3️⃣ Sales proceeds are used for acquisitions, direct care, or both

Question 7

📑 How should a work of art donation be reported on the financial statements?

Answer 7

✅ A note describing the collection must be referenced on the face of the BS

Question 8

🔄 How must restricted assets be disclosed?

Answer 8

✅ The nature and amount of different types of restricted assets must be disclosed on the face of the BS, in the notes, or both

Question 9

📈 How are earnings on restricted investments recorded?

Answer 9

✅ As an increase in assets without donor restrictions
❌ Unless the donor specifies a restriction on earnings

Question 10

🎓 Does GASB apply to private universities?

Answer 10

❌ No, FASB applies to private universities
✅ GASB applies only to governmental entities

Question 11

💵 How is investment income from a restricted endowment reported?

Answer 11

✅ If undisbursed, both principal and income contribute to net assets with donor restrictions

Question 12

🏦 What is a refundable advance in an NFP?

Answer 12

✅ A liability 💳
✅ Example: A university receives a donation that is conditional upon raising matching funds
✅ Not recognized as revenue until conditions are met

Question 13

🔄 What are the three options for reporting purchased or donated collections in an NFP?

Answer 13

1️⃣ Capitalize collections
2️⃣ Do not capitalize collections
3️⃣ Capitalize all collections

Question 14

📝 When should an unconditional promise (pledge) be recorded?

Answer 14

✅ As revenue when the promise is made, at net realizable value (NRV), net of an allowance for uncollectible pledges

Question 15

📌 What should you check when answering a financial statement classification question for an NFP?

Answer 15

✅ Read carefully to determine where the item belongs (P&L, BS, or other statement)

Question 16

🛠️ When are contributed services recognized as revenue in an NFP?

Answer 16

✅ Only if the service:
1️⃣ Creates or enhances nonfinancial assets
2️⃣ Requires specialized skills (e.g., licensed professionals like CPAs, doctors, law

Question 17

📊 What affects net assets with donor restrictions?

Answer 17

✅ Gains on investment value
✅ Investment revenue

Question 18

🎭 What do collections consist of in an NFP?

Answer 18

✅ Works of art, historical treasures, or similar assets

Question 19

🏛️ What are the basic financial statements required for state and local governments?

Answer 19

✅ Government-wide financial statements
✅ Fund financial statements
✅ Notes to the financials

Question 20

📊 What is a “fund” in governmental accounting?

Answer 20

✅ A self-balancing set of accounts
✅ Tracks cash, liabilities, equity, and changes in financial resources for a specific purpose

Question 21

🔄 What types of restrictions can be placed on NFP net assets?

Answer 21

1️⃣ Support of specific operating activities
2️⃣ Use in a future period
3️⃣ Acquisition of long-lived assets 🏗️
4️⃣ Investment for a specific term 📈
5️⃣ Perpetual donor-restricted endowments 💰
6️⃣ Preserved assets (e.g., land, artwork) that cannot be sold

Question 22

📑 How should an NFP value a donation of equity securities?

Answer 22

✅ At fair value at the date of the financial statements
❌ NOT at the lower of donation date FV and financial statement date FV

Question 23

📉 How are investment gains and losses reported in an NFP?

Answer 23

✅ Changes in net assets without donor restrictions
❌ Unless the donor specifies a restriction

Question 24

📊 How are debt and equity investments reported?

Answer 24

✅ Debt securities → Market value
✅ Equity securities → Fair value (FV)

Question 25

📈 How are revenues reported in an NFP?

Answer 25

✅ As increases in unrestricted net assets, unless restricted by the donor

Question 26

📉 How are expenses reported in an NFP?

Answer 26

✅ As decreases in unrestricted net assets ✅ Investment expenses must be reported net of investment returns

Question 27

📊 What must an NFP disclose about allocated costs?

Answer 27

✅ A description of the allocation method for program and support functions

Question 28

🏦 What happens when donor-restricted contributions are used in the same year?

Answer 28

✅ No impact on net assets at year-end since they were released from restriction

Question 29

💳 What is the difference between a refundable advance and unearned revenue?

Answer 29

✅ Refundable advance: Received conditionally and may be returned if conditions are not met ✅ Unearned revenue: Payment received for future services

Question 30

🏛️ What defines net assets in an NFP?

Answer 30

✅ Residual interest in assets after deducting liabilities ❌ Unlike for-profit equity, NFP net assets do not represent ownership interests

Question 31

💵 When is a promise to give (pledge) recognized in an NFP?

Answer 31

✅ When it is unconditional or when conditions are met

Question 32

📑 Where can board-designated net assets be reported?

Answer 32

✅ On the face of the BS or in the notes

Question 33

How are conditional contributions accounted for by nongovernmental not-for-profit (NFP) entities?

Answer 33

✅ Recorded as a refundable advance (liability) until conditions are met ✅ Not recognized as revenue until the barrier is overcome and donor lacks discretion ✅ Example: A matching gift requiring the NFP to raise funds is conditional and stays a liability until matched

Question 34

What are the three FASB options for reporting collections?

Answer 34

💼1) Capitalize Recent Collections: Capitalize collections purchased or donated 💰 Revenue: Recognize contributions equal to the fair value of donated collections. Example: Debit Painting, Credit Revenue for a donated painting 2) 🚫 Do Not Capitalize Collections: No capitalization of collections, whether purchased or donated. 💵 Expense: Report expenses for purchases; no contributions reported for donations. Example: No JE is done, or when painting is displayed Dr. Program/Operating Expense / Cr. Contribution Revenue 3) ✅ Capitalize All Collections: Capitalize both purchased and donated collections. 💰 Revenue: Recognize contributions equal to the fair value of donated collections.