FAR 65 - Not for profit Acct & Reporting 1 - Entity Types/Fin. Reporting/Special Issues Flashcards Preview

FAR - CPA Excel > FAR 65 - Not for profit Acct & Reporting 1 - Entity Types/Fin. Reporting/Special Issues > Flashcards

Flashcards in FAR 65 - Not for profit Acct & Reporting 1 - Entity Types/Fin. Reporting/Special Issues Deck (24):

Other not-for-profit organizations include
A. Hospitals.
B. Colleges and universities.
C. Religious organizations.
D. Voluntary health and welfare organizations.

C. There are four broad categories of not-for-profit entities: (1) hospitals and other healthcare entities, (2) colleges and universities, (3) voluntary health and welfare organizations, and (4) other not-for-profit organizations. Other not-for-profit organizations include religious organizations.


Nongovernmental not-for-profit organizations are required to report their financial statements on
A. A current financial resources measurement focus.
B. An economic resources measurement focus.
C. A cash measurement focus.
D. None of the above.

B. Nongovernmental not-for-profit organizations use full accrual accounting and the flow of economic resources measurement focus.


Nongovernmental not-for profit organizations that wish to follow generally accepted accounting principles in the preparation of their financial statements should follow
A. FASB standards.
B. GASB standards.
C. Both FASB and GASB standards.
D. Neither FASB nor GASB standards.

A. The Financial Accounting Standards Board (FASB) sets accounting standards for not-for-profit and for-profit organizations.


T/F: Two-year institutions with taxing authority are excluded from Not-for-Profit organizations.



T/F: GASB regulates the accounting and reporting practices for all "private" not-for-profit-organizations; FASB governs the governmentally affiliated organizations.

Opposite is true


Nongovernmental not-for-profit organizations are required to provide which three external financial statements?

Statement of Financial Position, Statement of Activities, Statement of Cash Flows

Note that a voluntary health and welfare organization also must report a Statement of Functional Expenses.


A nongovernmental not-for-profit organization's Statement of Activities is similar to which of the following for-profit financial statements?
A. Balance sheet
B. Statement of Cash Flows
C. Statement of Retained Earnings
D. Income statement

D. Income statement. According to SFAS No. 117 para. 30(b), the Statement of Activities for not-for-profit organizations is the financial statement that is issued instead of a business entity's income statement.


Which of the following financial categories are used in a nongovernmental not-for-profit organization's statement of financial position?
A. Net assets, income, and expenses.
B. Income, expenses, and unrestricted net assets.
C. Assets, liabilities, and net assets.
D. Changes in unrestricted, temporarily restricted, and permanently restricted net assets.

C. The statement of financial position for nongovernmental not-for-profit organizations includes assets, liabilities, and net assets. "Net assets" is used rather than "retained earnings" by not-for-profits.


A not-for-profit voluntary health and welfare organization should report a contribution for the construction of a new building as cash flows from which of the following in the Statement of Cash Flows?
A. Operating Activities
B. Financing Activities
C. Capital Financing Activities
D. Investing Activities

B. The Financing Activities section includes contributions and investment revenues restricted for long-term purposes (e.g., restrictions for acquisition of capital assets, endowments) and debt-related activities (debt proceeds, repayments, lease payments, etc.).


Birdlovers, a community foundation, incurred $5,000 in management and general expenses during 2005.

In Birdlovers' Statement of Activities for the year ending December 31, 2005, the $5,000 should be reported as
A. A contra account offsetting revenue and support.
B. Part of program services.
C. Part of supporting services.
D. A direct reduction of fund balance.

C. Expenses for not-for-profit organizations fall into two broad categories:
(1) program services and
(2) supporting services. Expenses for program services are incurred because of the stated mission of the not-for-profit. All other expenses fall under the supporting services classification. The $5,000 in management and general expenses should be reported as part of supporting services.


An unrestricted cash contribution should be reported in a nongovernmental not-for-profit organization's Statement of Cash Flows as an inflow from
A. Operating Activities.
B. Investing Activities.
C. Financing Activities.
D. Capital and Related Financing Activities.

A. Unrestricted cash contributions should be included in the Operating Activities section of the Statement of Cash Flows, along with unrestricted investment earnings, revenue restricted for operating purposes (Program Restrictions), revenue from exchange transactions, and operating expenditures (salaries, supplies, interest expense), including grants to other organizations


T/F: The Statement of Activities has four principal sections: Revenues and Gains, Net Assets Released from Restrictions, Expenses and Losses, and Change in Net Assets.



T/F: The Statement of Functional Expenses is recommended only for Voluntary Health & Welfare Organizations, but is required for all other NFP organizations.

Opposite is true. Only required for VHWO


T/F: The Statement of Financial Position is required for most, but not all, organizations.

All organizations, not most.


T/F: Exchange revenues (fees, dues, charges for services, etc.) can only be reported under Unrestricted Net Assets by not-for-profit organizations.



Which of the following terms is used to indicate that a donor provided a gift with explicit instructions that the gift is to be used for a specific purpose by the not-for-profit organization but the entire amount may be spent right away?
A. Board-designated net assets
B. Endowment assets
C. Permanently restricted net assets
D. Temporarily restricted net assets

D. This is an example of a use restriction for which the gift will be recognized as an increase in temporarily restricted net assets at the time of the gift.


At which of the following amounts should a nongovernmental not-for-profit organization report investments in debt securities?
A. Potential proceeds from liquidation sale.
B. Discounted expected future cash flows.
C. Quoted market prices.
D. Historical cost.

C. Unlike for-profit entities, not-for-profit entities do not break debt securities into trading, available-for-sale, and held-to-maturity categories. Following FASB Statement No. 124, not-for-profits value debt securities at fair value (quoted market price).


How should a nongovernmental not-for-profit organization classify gains and losses on investments purchased with permanently restricted assets?
A. Gains may not be netted against losses in the statement of activities.
B. Gains and losses can only be reported net of expenses in the statement of activities.
C. Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increases or decreases in unrestricted net assets.
D. Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increases or decreases in permanently restricted net assets.

C. If the donor placed restrictions on the use of gains (purpose or time restrictions), the gains are temporarily restricted until the restriction is met. If there are no restrictions, the gains and losses are unrestricted. Revenues and expenses must be reported separately but gains and losses may be reported net.


Securities donated to an NPO should be recorded at

fair value at the time of donation.


During the current year, Mill Foundation, a nongovernmental not-for-profit organization, received $100,000 in unrestricted contributions from the general public. Mill's board of directors stipulated that $75,000 of these contributions would be used to create an endowment. At the end of the current year, how should Mill report the $75,000 in the Net Assets section of the Statement of Financial Position?
A. Permanently restricted
B. Unrestricted
C. Temporarily restricted
D. Donor restricted

B. This answer is correct. Restrictions placed on resources by the board of directors constitute internal, revocable restrictions on assets and are not sufficient to cause the resources to be reported in Temporarily Restricted or Permanently Restricted Net Assets.


A nongovernmental not-for-profit organization received the donations of corporate stock during the year, what value of investments will the organization report at the end of the year?

FASB Statement No. 124 requires donated securities to be initially recorded at their fair market value on the date of the gift and to be reported at their market value at the financial reporting date (at the end of the year).


T/F: A museum must capitalize and report in their balance sheets assets such as works of art, historical treasures, historical archives, and similar collectible items if they are held for public inspection.

These are considered Inexhaustible fixed assets which do NOT need to be capitalized. These assets are not recognized on the face of the FS as assets, including when they are sold, purchased or donated. However, they are disclosed in the Notes to the FS.


T/F: Quasi-endowments are included in Permanently Restricted Net Assets when certain restrictions on resources exist.

These are amounts set aside by the governing board of the organization, rather than outside sources, of which the principal must be retained and invested. They are not regular endowments as they don't come from an external party, and therefore are not restricted like a regular endowment, but instead are included with Unrestricted Net Assets.


T/F: Changes in market value of investments are recognized on the Statement of Activities as unrealized gains and losses during the period of the change.


Decks in FAR - CPA Excel Class (79):