Flashcards in NFP Accounting Deck (67):
Which financial statements are required for not - for - profit organizations?
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
Statement of Functional Expense (Volunteer Health Organizations Only)
What are the major classifications found on a Statement of Financial Position?
Similar to Balance Sheet:
Permanently Restricted Assets
Temporarily Restricted Assets
What are the major classifications in a Statement of Activities?
Similar to an Income Statement - organization - wide:
Expenses - ONLY deducted from Unrestricted Revenues
Gains and Losses
Changes in Net Asset classes
What are the characteristics of a Statement of Cash Flows for not - for - profits? What are the major classifications?
Both direct and indirect methods are OK
Operating Activities - Unrestricted Revenues and Unrestricted Expenses
Financing Activities - Endowments and restricted contributions
Which organizations are required to present a Statement of Functional Expenses?
Volunteer Health Organizations
Which statements are required for non - governmental hospitals?
Statement of Operations
Statement of Changes in Net Assets
Statement of Cash Flows
Financial Statement Notes
Which basis of accounting is used for revenues and net assets?
Accrual basis of accounting is used
Only external parties can restrict the use of assets (permanent or temporary)
Assets earmarked internally by management are still classified as unrestricted
What are the characteristics of unrestricted assets or revenue?
No restrictions or conditions placed on entity in order to use the resources
Note: assets earmarked internally by management are still unrestricted
When are revenues on contributions recognized?
Revenues on contributions are recognized in the year received - not the year the contribution is spent and are recorded at Fair Value on the date received
When are services rendered considered contributions?
If the organization would have otherwise paid for them
They increase the value of a non - monetary asset
Is hospital charity care revenue?
It is disclosed in the notes to the financial statements only.
How are unconditional pledges to contribute recorded?
Classified as revenue in the current year only - multi - year future contributions fall under Temporarily Restricted.
Which revenues are expenses deducted from?
Expenses ONLY deducted from Unrestricted Revenues - not Temporary or Permanently Restricted Revenues/Assets
What are the characteristics of temporarily restricted assets/revenue?
Use is restricted to a future time - which could then convert to unrestricted - Class: Temp. Restricted Revenue
Unrestricted contributions promised (including multi - year contributions) - but not yet received are actually restricted by time and are therefore classified as Temporarily Restricted Assets - Multi - year contributions are recorded at the present value of the future contributions
What are the characteristics of an endowment?
Use of investment is restricted - but income from investment could be either restricted or unrestricted
Must be under control of receiving entity (Quasi Endowment) in order to be recorded in unrestricted net assets
Otherwise - a memo entry is recorded
When is the donation of an art collection recognized as a contribution or asset?
Not recognized as assets or contribution revenue if they are held of display or education' or their sale results in the purchase of similar items
When both Temporarily Restricted Assets and Unrestricted Assets are available for use - which assets are used first?
Temporarily restricted assets are used before Unrestricted assets.
How is a refundable advance recorded by a not for profit?
Classified as a Liability
Promise to contribute assets pending on certain conditions being met
Becomes unconditional once the possibility that it won't happen is remote
How are investments recorded and valued in not - for - profit accounting?
Fair Value is mostly used
Exception - Equity method used when significant influence exists
How are scholarships recorded?
As a reduction of revenue - netted against college's tuition
How is depreciation expense recorded by a not - for - profit?
Depreciation expense is allocated proportionately to various functions
What additional statement is required for voluntary health and welfare organizations
Statement of functional expenses
How are assets reported on statement of financial position
Unrestricted, temp restricted, permanently restricted
How are term and regular endowments recorded
Term - temporary restricted
Regular - permanently restricted
When are contributions reported
When revenue received regardless of donor imposed restrictions
Where are expenses deducted from
Only unrestricted revenues
What is included in cash flow operating activities
Revenue and expenses that are unrestricted
What financial statements are required for NFP
Statement of financial position
Statement of activities
Statement of cash flows
What's included in NFP statement of cash flows
How are gifts of long lived assets with no restriction recorded
Class as unrestricted if accounting policy allows
How are contributions received from outside donors for use in research
Report and temp restricted assets
How is a multitrack pledge recorded
Report at PV in temporary restricted revenue
How is restricted cash inflow for acquisition of property treated on statement of cash flows
Include in financing activities
What is the general purpose of NFP FS
Focus on basic info of the organization to enhance relevance, understandability, and comparability
When is a liability recorded by an entity
When entity acts as an agent or trustee
How should entity record works of art
Don't recognize contributions if art held for public exhibition and if sold proceeds used to acquire other art
Where are change in assets required to be reported
Statement of activities
Where are expenses according to function presented
On FS or in notes to FS
How is a quasi endorsement recorded
As unrestricted asset
How is conditional promise to contribute recorded
Refundable advance - liability
How is a permanent endowment and investment interest recorded on statement of cash flows
Both as financing activity if investment interest used to purchase PPE
What are functional and natural expenses and when are they required for health and welfare organizations
Functional - program and supporting
Natural - salary expense , depreciation expense
When are donations of services recognized
When services create or enhance no financial asset
When services require special skill set that would have to be paid for
When is a conditional promise considered unconditional
When possibility that condition will not be met is remote
How is contribution revenue calculated
Amount given above market revenue
What triggers a reclassification of assets
Expiration of donor imposed restrictions ( time or purpose )
How does the expiration of imposed conditions affect asset
Only increases asset no reclassification
How are investments recognized on NFP books
FV is no significant influence
Equity method if significant influence
When to record contribution as a liability
Donor doesn't grant recipient variance power
Recipient org and beneficiary are not financially interrelated
How is a contribution treated when recipient and beneficiary interrelated and resources must be used to benefit beneficiary
Record asset and liability
What is variance power
Ability to redirect resources transfer to it
What is a split interest agreement
Donor makes initial gift to trust or directly to NFP and NFP is not sole beneficiary
When are joint costs of informational materials recorded
As fundraising expense unless an appeal is designed to motivate audience to action other than providing financial support
What are considered capital additions
Nonexpendable gifts restricted to endowment, plant, loan funds and legally restricted investment income
On investments such as funds
How are gifts in kind treated
Agency transactions or contributions depending on extent of discretion
What is an agency transaction
Asset for which organization has too little discretion
What FS are required for hospital
Statement of operations
Statement of change in net assets
Statement if cash flows
Calculate net patient service revenue
Gross patient service revenue less contractual obligation with 3rd party payor less allowance for discounts to hospital employees
How is a voluntary health and welfare organization classified
As NFP, nonbusiness not hospital
What items are reported separate from performance indicator
Receipt of restricted contributions
Contribution of long lived assets
Restricted investment returns
Unrealized gain or loss on investment a
How are expenses prepared for health care org
Using natural or functional classification
What is the performance indicator and give example
Report of results of operations
Excess revenue over expenses
How is charity care recorded
Not recorded on FS except in notes
How are payments of future services at retirement communities recorded
Nonrefundable advance fees as liability
What is recorded in other revenue gain and loss for health care org
Income from services other than providing health care service or coverage to patients
In a health care org at what value are donated noncash assets recorded