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Flashcards in NFP Accounting Deck (30):

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:
Net Assets
Unrestricted Assets
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
Permanently Restricted
Temporarily Restricted


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

Investing Activities

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?

Balance Sheet
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?

Special skills are provided by a donor possessing those skills when the organization normally would have paid for the services

OR the services increase the value of a non - monetary asset

ALWAYS report at FMV

Dr. Asset or Expense for FMV
Cr. Contribution Revenue for FMV


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.

Conditional pledges are recognized net of allowance for uncollectible pledges

KEY: revenue recognition is NOT tied to the receipt of cash


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


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?

Collectibles (also known as inexhaustible fixed assets) are not recognized as assets or contribution revenue if they are
1. Held for public exhibition, education, or research rather than financial gain;
2. Protected, kept unencumbered, cared for, and preserved;
3. Subject to a policy that requires proceeds from sales of collection items to be used to acquire other items for collections.
They are only DISCLOSED in the notes, not capitalized or depreciated

NOTE: if they are going to be sold, the contribution doesn't meet the above rules and if recognized as revenue


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


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 are the 3 types of endowments?

Pure or regular - donated by an external party with stipulation that they must remain intact
Term - donated by external party, must be held for a period of time (temporarily restricted)
Quasi - governing board sets aside funds, these are NOT actually restricted


How are investments reported?

Reported at FMV (Exception - Equity method used when significant influence exists)
No held-to-maturity, AFS, or trading designations
All unrealized gains/losses go to the Statement of Activities


What is a plant fund?

Account for investments in plant and resources available for capital asset acquisition and net assets are typically separated into unrestricted, temporarily restricted, or permanently restricted. Plant funds frequently take on over names such as "Land, Building, & Equipment Funds," or "Plant Expansion Fund,"


What is a loan fund?

Commonly used by Colleges and Universities to account for loans made to students


What is an annuity (life income) fund?

Account for "split-interest funds" in which the not-for-profit organization shares a beneficial interest with another external party


What is an agency fund?

Account for resources held by the not-for-profit organization as an agent for a third party.


What types of restrictions are placed on temporarily restricted assets?

Program restrictions - specific purpose
Time restrictions - after a certain date/event
Asset acquisition/capital restrictions - only use for capital purposes


What is another name for permanently restricted assets?



How are pledges that will be made over multiple fiscal periods recognized?

Revenue recognized = net present value of the contribution

Portion not received yet is temporarily restricted

NPV is recalculated the end of each period - increases are considered contribution revenue