Non-Government NPOs
Follows Non-governmental
Hierarchy shown on pp 4-5
But FASB did very little to develop
financial accounting standards for
Non-governmental NPOs until
recently
AICPA developed early NPO
standards through Audit Guides
Present and Potential Donors are
primary users of financial
statements
SFAS Number 93-Depreciation (1987)
Required that all NPO’s under FASB jurisdiction
record depreciation annually in the accounts on
long-lived assets.
So, a private college or university must record
depreciation, but at the time of SFAS #93, a
governmentally owned college or university did
not have to. Distorted comparability function.
GASB #35 changed this for governmentally
owned colleges and universities
SFAS Number 116 (1993)
Contributions Received


Unconditional- FMV when received
Conditional-FMV when conditions are met
Matching Gift
Contributions Made: Expense when
made or conditions met.
Categories



Permanently Restricted
Temporarily Restricted
Unrestricted
SFAS Number 116
Miscellaneous

Services
Whenever the service (1) creates or enhances nonfinancial assets or (2) requires specialized skills, is
provided by someone possessing those skills, and
typically would be purchased if not provided free

Works of art, etc
May or may not be recorded
If not recorded, extensive notes to financial
statements used for disclosure
If sold, proceeds must be used to acquire other
collections for viewing by the public
SFAS Number 117
Requires NPO Financial Statements
 Statement of Financial Position
 Statement of Activities
 Statement of Cash Flows
 Statement of Functional Expenses for VHWOs
Statement of Financial Position
 Assets
 Liabilities
 Net Assets
Permantly restricted, temporarily restricted, unrestricted
(Page 290)
SFAS Number 117
Statement of Activities (Page 289)


Revenues-Gain-Expenses-Losses
Change in organization’s net assets
Permanently restricted
Temporarily restricted
Unrestricted
Statement of Cash Flows (Page 291)
Cash & Cash Equivalent
3 categories similar to business.
SFAS Number 124
This statement requires that investments in
equity securities with readily determinable fair
values and all investments in debt securities be
reported at fair value with gains and losses
included in a statement of activities.
Originally SFAS #115 specifically excluded
NPO’s & Govt. entities.
So 124 Requires N-G NPO’s use same
investment valuation as FP’s
SFAS 133
Derivatives – Rights to ownership at later
dates (In the futures family)
Example: The right to sell 100 shares of
IBM on November 1, 2005 and a
commitment to buy today when price is
$40.00 per share
Requires derivative agreements to be
recorded as assets and liabilities at FMV
on S of FP; Unrealized gains and losses
on S of A
SFAS 136
How to handle transfers to NPOs that hold
for other organizations or individuals
Recorded as a liability if donor
organization has no control (Cannot redirect the funds)
Recorded as a revenue (contribution) if
donor organization has control (alternative
use)
NPO Accounting Quirks
Funds restricted as to time are recorded as
assets in year of receipt or unconditional
pledge, whichever is earlier, and temporarily
restricted revenue
Then, released from restriction in the time
period stated by the contributor
Funds restricted as to purpose (other than
plant) are released whenever the expenditures
are made for the purpose
Restricted funds are assumed to be used first
Expenses are only from unrestricted assets
NPO Accounting Quirks, Continued
Property, plant, and equipment is recorded at
cost and depreciated similar to business
Acquisition of PP & E may be handled

From Unrestricted resources
As unrestricted and depreciated, or
Temporarily restricted and reclassified according to
Depreciation schedule

From Restricted resources
Initially as unrestricted, then reclassify immediately to
temporarily restricted, or
Temporarily restricted and reclassified according to
Depreciation schedule
NPO Accounting Quirks, Continued
Multi-year pledges



Recorded in year of pledge as temporarily restricted
at the present value of future cash flows
When cash is received, that amount is reclassified
as unrestricted
As time passes, the increase in PV of future
receipts is recorded as additional contributions, not
interest revenue
Investments in equity securities with
determinable FMV recorded at FMV
Voluntary Health & Welfare
Organizations (VHWO’s)
YMCA
United Way
American Heart Association
(Most are non-govt; but some may receive
some govt support)
Accounting Authority
GASB
Govt Supported
FASB
Non-Govt Supported (most)
VHWO’s Continued
SFAS #116 Impact

Major-Since contributions are major source of
revenue.
SFAS #117 Impact

Also major-since most VHWOs prepared
financial statements on a disaggregated
(layered) basis.
VHWO’s Continued
Sources of Accounting Authority






AICPA Audit Guide, Audits of VHWOs (1974)
SFAS #116
SFAS #117
SFAS #124
SFAS #133
SFAS #136
Financial Statements
Statement of Financial Position (Net Assets as to
restriction category)
Statement of Activities
Statement of Cash Flows
Statement of Functional Expenses


Program Services
Supporting Services
If expenses are allocable between program
services and supporting services and are
primarily for supporting, all are reported as
supporting services
VHWO Accounting Notes of
Importance
Revenue




Accrual Basis
Revenues and public support items may be
recognized in any fund except custodian funds
Pledges (gross)
Government agencies-normally restricted
Expenses


Program- directly related to mission
Supporting- administration, clerical, etc