CHAPTER 11
ACCOUNTING FOR OTHER NONPROFIT ORGANIZATIONS
--------------------------------------------------------------------------------------------------------------------READ CAREFULLY THE INFORMATION CONCERNING FASB STATEMENTS 116
AND 117 WHICH ARE DISCUSSED IN THIS CHAPTER. THE REQUIREMENTS OF
THESE STATEMENTS APPLY TO NONGOVERNMENTAL; NOT-FOR-PROFIT
COLLEGES
AND
UNIVERSITIES
PRESENTED
IN
CHAPTER
13;
NONGOVERNMENTAL, NOT-FOR-PROFIT HEALTH CARE ORGANIZATIONS IN
CHAPTER 12 AND TO ALL ORGANIZATIONS PRESENTED IN CHAPTER 11 (THIS
CHAPTER). THE TWO APPENDICES AT THE END OF THESE CHAPTER NOTES
SUMMARIZE FASB STATEMENTS 116 AND 117.
------------------------------------------------------------------------------------------------------------------THERE HAS BEEN A FLURRY OF RECENT ACTIVITY BY BOTH THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS AND THE FINANCIAL
ACCOUNTING STANDARDS BOARD WITH RESPECT TO NOT-FOR-PROFIT
ORGANIZATIONS. THE ACCOUNTING AND REPORTING REQUIREMENTS FOR
THESE ORGANIZATIONS IS CONSOLIDATED IN FASB STATEMENTS 116 AND 117
AND THE AICPA "ACCOUNTING AND AUDITING GUIDE FOR NOT-FOR-PROFIT
ORGANIZATIONS." NOTE THAT THE GASB HAS NO JURISDICTION OVER THESE
ENTITIES.
1.
DEFINITION OF NOT-FOR-PROFIT ORGANIZATIONS AS STATED IN FASB
117:
"AN ENTITY THAT POSSESSES THE FOLLOWING CHARACTERISTICS
THAT DISTINGUISH IT FROM A BUSINESS ENTERPRISE:
(A)
CONTRIBUTIONS OF SIGNIFICANT AMOUNTS OF RESOURCES FROM
RESOURCE PROVIDERS WHO DO NOT EXPECT COMMENSURATE OR
PROPORTIONATE RETURN. (B) OPERATING PURPOSES OTHER THAN TO
PROVIDE GOODS OR SERVICES AT A PROFIT, AND ABSENCE OF
OWNERSHIP INTERESTS LIKE THOSE OF BUSINESS ENTERPRISES."
2.
FORMERLY
THERE
ORGANIZATIONS:
A.
WERE
TWO
CATEGORIES
OF
THESE
VOLUNTARY HEALTH AND WELFARE ORGANIZATIONS (VHWOS)
ARE NONGOVERNMENTAL ORGANIZATIONS THAT RECEIVE
VOLUNTARY CONTRIBUTIONS FROM THE GENERAL PUBLIC THAT
ARE USED FOR HEALTH, WELFARE, OR COMMUNITY SERVICES.
E.G., AMERICAN CANCER SOCIETY, BOY SCOUTS OF AMERICA,
NATIONAL URBAN LEAGUE, YMCA.
1
B.
3.
OTHER NOT-FOR-PROFIT ORGANIZATIONS (ONPOS) ARE THOSE
NOT-FOR-PROFIT ORGANIZATIONS WHICH ARE NOT INVOLVED
WITH HEALTH AND WELFARE MATTERS.
E.G., CEMETERY
ORGANIZATIONS, FRATERNAL ORGANIZATIONS, LABOR UNIONS,
LIBRARIES, MUSEUMS, POLITICAL PARTIES, PROFESSIONAL
ASSOCIATIONS (AICPA), RELIGIOUS ORGANIZATIONS, SOCIAL AND
COUNTRY CLUBS, TRADE ASSOCIATIONS. (AICPA EXAMPLES)
NOTE THAT MANY OF THESE ORGANIZATIONS RECEIVE DUES.
WITH THE ADOPTION OF FASB STATEMENTS 116 AND 117 THE
DISTINCTION BETWEEN THE TWO GROUPS HAS BEEN BASICALLY
ELIMINATED.
THE AICPA, "ACCOUNTING AND AUDIT GUIDE FOR NOT-FOR-PROFIT
ORGANIZATIONS" DOES NOT DISTINGUISH BETWEEN VHWOS AND
ONPOS. THAT GUIDE PROVIDES THE FOLLOWING LIST OF NOT-FORPROFIT ORGANIZATIONS. THE LIST INCLUDES VOLUNTARY HEALTH AND
WELFARE ORGANIZATIONS AND IS NOT ALL INCLUSIVE.
4.
-
CEMETERY ORGANIZATIONS
CIVIC AND COMMUNITY ORGANIZATIONS
COLLEGES AND UNIVERSITIES
ELEMENTARY AND SECONDARY SCHOOLS
FEDERATED FUND-RAISING ORGANIZATIONS
FRATERNAL ORGANIZATIONS
LABOR UNIONS
LIBRARIES
MUSEUMS
OTHER CULTURAL ORGANIZATIONS
PERFORMING ARTS ORGANIZATIONS
POLITICAL PARTIES
POLITICAL ACTION COMMITTEES
PRIVATE AND COMMUNITY FOUNDATIONS
PROFESSIONAL ASSOCIATIONS
PUBLIC BROADCASTING STATIONS
RELIGIOUS ORGANIZATIONS
-
RESEARCH AND SCIENTIFIC ORGANIZATIONS
SOCIAL AND COUNTRY CLUBS
TRADE ASSOCIATIONS
VOLUNTARY HEALTH AND WELFARE ORGANIZATIONS
REPORTING REQUIREMENTS FOR NOT-FOR-PROFIT ORGANIZATIONS
2
ARE ESTABLISHED IN FASB STATEMENT #117. THAT STATEMENT IS
SUMMARIZED IN APPENDIX B. PLEASE REVIEW THOSE NOTES WITH THE
CURRENT CHAPTER.
5.
A SIGNIFICANT AMOUNT OF THE FINANCIAL SUPPORT FOR NOT-FORPROFIT ORGANIZATIONS COMES FROM CONTRIBUTIONS.
FASB
STATEMENT # 116 RELATES TO CONTRIBUTIONS MADE AND RECEIVED.
FASB 116 IS SUMMARIZED IN APPENDIX A..
6.
FOLLOWING ARE SOME IMPORTANT ACCOUNTING AND REPORTING
ISSUES INCLUDED IN THE AICPA “AUDIT AND ACCOUNTING GUIDE FOR
NOT-FOR-PROFIT ORGANIZATIONS"
A.
B.
THE REQUIRED FINANCIAL STATEMENTS ARE:
1)
STATEMENT OF FINANCIAL POSITION (P461)
2)
STATEMENT OF ACTIVITIES (P463)
3)
STATEMENT OF CASH FLOWS (P465)
4)
STATEMENT OF FUNCTIONAL EXPENSES (FOR
VOLUNTARY HEALTH AND WELFARE ORGANIZATION)
(P464)
CASH AND CASH EQUIVALENTS WHOSE USE HAS DONOR
IMPOSED RESTRICTIONS, SHOULD BE REPORTED AS A
SEPARATE ITEM ON THE STATEMENT OF FINANCIAL
POSITION
THIS REPORTING REQUIREMENT HAS RESULTED IN SOME CONFUSION BECAUSE OF THE
WORDING.
THE AICPA AUDIT AND ACCOUNTING GUIDE STATES ON PP41-42 “ASSETS NEED NOT BE
DISAGGREGATED ON THE BASIS OF THE PRESENCE OF DONOR IMPOSED RESTRICTIONS ON
THEIR USE; FOR EXAMPLE, CASH AVAILABLE FOR UNRESTRICTED CURRENT USE NEED NOT
BE REPORTED SEPARATELY FROM CASH RECEIVED WITH DONOR-IMPOSED RESTRICTIONS
THAT IS ALSO AVAILABLE FOR CURRENT USE. HOWEVER, CASH OR OTHER ASSETS EITHER
(A) DESIGNATED FOR LONG-TERM PURPOSES OR (B) RECEIVED WITH DONOR IMPOSED
RESTRICTIONS THAT LIMIT THEIR USE TO LONG-TERM PURPOSES SHOULD NOT BE
AGGREGATED ON A STATEMENT OF FINANCIAL POSITION WITH CASH OR OTHER ASSETS
THAT IS AVAILABLE FOR CURRENT USE. FOR EXAMPLE, CASH THAT HAS BEEN RECEIVED
WITH DONOR-IMPOSED RESTRICTIONS LIMITING ITS USE TO THE ACQUISITION OF LONG-LIVED
ASSETS SHOULD BE REPORTED UNDER A SEPARATE CAPTION, SUCH AS “CASH RESTRICTED
TO INVESTMENT IN PROPERTY AND EQUIPMENT,” AND DISPLAYED NEAR THE SECTION OF
THE STATEMENT WHERE PROPERTY AND EQUIPMENT IS DISPLAYED.” (SEE P461)
3
THE FASB STATEMENT IS CLEAR ON THIS ISSUE ON PAGE 4 THE STATEMENT PROVIDES:
“CASH OR OTHER ASSETS RECEIVED WITH DONOR-IMPOSED RESTRICTION THAT LIMITS
THEIR USE TO LONG-TERM PURPOSES SHOULD NOT BE CLASSIFIED WITH CASH OR OTHER
ASSETS THAT ARE UNRESTRICTED AND AVAILABLE FOR CURRENT USE.”
C.
CONTRIBUTED SERVICES SHOULD BE REPORTED AS
CONTRIBUTION REVENUE AND AS ASSETS OR EXPENSES
ONLY IF THE SERVICES CREATE OR ENHANCE A
NONFINANCIAL (NONMONETARY) ASSET (E.G. PROPERTY
AND EQUIPMENT) OR:
1)
WOULD TYPICALLY NEED TO BE PURCHASED BY THE
ORGANIZATION IF THEY HAD NOT BEEN PROVIDED BY
CONTRIBUTION
2)
REQUIRE SPECIALIZED SKILLS, AND
3)
ARE PROVIDED BY INDIVIDUALS WITH THOSE SKILLS.
D.
THE FULL ACCRUAL BASIS OF ACCOUNTING IS USED
E.
ACCOUNTING FOR INVESTMENTS:
1)
INITIALLY RECORDED AT ACQUISITION COST OR FMV
IF RECEIVED AS A CONTRIBUTION
2)
INVESTMENT INCOME REPORTED AS AN INCREASE IN
UNRESTRICTED, TEMPORARILY RESTRICTED OR
PERMANENTLY RESTRICTED NET ASSETS (REVENUE)
3)
REALIZED GAINS AND LOSSES SHOULD BE
RECOGNIZED WHEN INVESTMENTS ARE SOLD OR
OTHERWISE DISPOSED OF. MUST BE REPORTED ON
THE STATEMENT OF ACTIVITIES AND CLASSIFIED AS
UNRESTRICTED UNLESS RESTRICTED BY THE DONOR
OR APPLICABLE LAW
4)
SUBSEQUENT
TO
ACQUISITION,
INVESTMENTS
SHOULD BE REPORTED AT THEIR FAIR MARKET
VALUE. AS REQUIRED IN FASB #124. PREVIOUSLY
MARKET OR LOWER OF COST OR MARKET WAS
ACCEPTABLE
4
5)
CHANGES IN THE FAIR MARKET VALUE OF
INVESTMENTS ARE UNREALIZED HOLDING GAINS OR
LOSSES
6)
REALIZED
AND
UNREALIZED
LOSSES
ON
INVESTMENTS MAY BE NETTED AGAINST REALIZED
AND UNREALIZED GAINS ON THE STATEMENT OF
ACTIVITIES
F.
FIXED ASSETS SHOULD BE RECORDED AT COST OR, IF
CONTRIBUTED, AT FAIR MARKET VALUE
G.
DEPRECIATION SHOULD BE
DEPRECIABLE FIXED ASSETS
H.
FUNDS MAY BE USED FOR ACCOUNTING PURPOSES.
HOWEVER, UNDER FASB 117, THE REPORTING MUST BE
FOR
THE
ORGANIZATIONS
TOTAL
UNRESTRICTED,
TEMPORARILY
RESTRICTED
OR
PERMANENTLY
RESTRICTED NET ASSETS
RECORDED
FOR
ALL
REPORTING BY FUND IS PERMITTED IN NOTES OR
SUPPLEMENTARY INFORMATION TO THE FINANCIAL
STATEMENTS
I.
THE GUIDE DESCRIBES SEVERAL COMMONLY USED KINDS
OF FUNDS AND DISCUSSES HOW THEIR FUND BALANCE
SHOULD BE REPORTED BASED ON THE REQUIREMENTS OF
FASB 117:
1)
UNRESTRICTED CURRENT FUND: INCLUDES THE
UNRESTRICTED RESOURCES THAT ARE AVAILABLE
FOR
THE
GENERAL
OPERATIONS
OF
THE
ORGANIZATION AND OVER WHICH THE GOVERNING
BOARD HAS DISCRETIONARY CONTROL.
PRINCIPAL SOURCES OF FUNDS ARE FROM
UNRESTRICTED
CONTRIBUTIONS;
EXCHANGE
TRANSACTIONS;
UNRESTRICTED
INVESTMENT
INCOME.
RESOURCES ARE USED TO MEET THE
COSTS
OF
PROVIDING
THE
ORGANIZATIONS
PROGRAMS AND SUPPORTING SERVICES.
FUND BALANCES OF UNRESTRICTED CURRENT
FUNDS SHOULD BE CLASSIFIED ON THE STATEMENT
5
OF FINANCIAL POSITION AS UNRESTRICTED NET
ASSETS UNLESS DONORS HAVE STIPULATED
RESTRICTIONS ON THE USE OF CONTRIBUTED
ASSETS THAT EXPIRE BY PASSAGE OF TIME. THESE
SHOULD
BE
CLASSIFIED
AS
TEMPORARILY
RESTRICTED NET ASSETS.
2).
RESTRICTED CURRENT FUNDS: INCLUDED IN THESE
FUNDS ARE THOSE RESOURCES THAT ARE
AVAILABLE FOR USE IN THE OPERATIONS OF AN
ORGANIZATION, BUT ONLY AS SPECIFIED BY A
DONOR, OR GRANTOR.
PRINCIPAL FUND SOURCES ARE CONTRIBUTIONS
FROM
DONORS;
CONTRACTS
AND
GRANTS;
ENDOWMENT INCOME
THE BALANCES OF THESE FUNDS SHOULD NORMALLY
BE CLASSIFIED AS TEMPORARILY RESTRICTED NET
ASSETS
3)
LAND, BUILDING, AND EQUIPMENT FUND (PLANT):
THIS FUND IS USED TO ACCOUNT FOR THE LAND,
BUILDINGS, AND EQUIPMENT CURRENTLY IN USE IN
THE OPERATION OF THE ORGANIZATION, TOGETHER
WITH
ANY
ASSOCIATED
DEPRECIATION
AND
LONG-TERM DEBT. IT IS ALSO USED TO ACCOUNT
FOR THE RESOURCES WHOSE USE IS RESTRICTED
TO THE ACQUISITION OF LAND, BUILDINGS OR
EQUIPMENT.
THE PORTION OF THE PLANT FUNDS WHICH
REPRESENTS AMOUNTS RECEIVED WITH DONOR
IMPOSED RESTRICTIONS SHOULD BE CLASSIFIED AS
TEMPORARILY RESTRICTED.
OTHER BALANCES
SHOULD BE CLASSIFIED AS UNRESTRICTED NET
ASSETS.
4)
OTHER FUNDS INCLUDE:
ENDOWMENT FUNDS,
CUSTODIAL OR AGENCY FUNDS, LOAN FUNDS,
ANNUITY FUNDS AND LIFE INCOME FUNDS
6
BALANCES
IN
THESE
FUNDS
WHICH
HAVE
RESTRICTIONS PLACED ON THEM BY CONTRIBUTORS
SHOULD BE CLASSIFIED AS TEMPORARILY OR
PERMANENTLY RESTRICTED. OTHERWISE, CLASSIFY
AS UNRESTRICTED NET ASSETS
7
APPENDIX A
SUMMARY OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 116
ACCOUNTING FOR CONTRIBUTIONS RECEIVED AND MADE
A.
CONTRIBUTIONS RECEIVED SHALL BE RECOGNIZED AS
REVENUES OR GAINS, AND AS ASSETS, DECREASES OF
LIABILITIES, OR EXPENSES DEPENDING ON THE FORM OF THE
BENEFITS RECEIVED, IN THE PERIOD RECEIVED.
B.
CONTRIBUTIONS SHALL BE MEASURED AT THEIR FAIR VALUES.
C.
CONTRIBUTIONS RECEIVED BY NOT-FOR-PROFIT ORGANIZATIONS
SHALL BE REPORTED AS RESTRICTED SUPPORT OR
UNRESTRICTED SUPPORT AS.
D.
CONTRIBUTIONS OF SERVICES SHALL BE RECOGNIZED IF THE
SERVICES RECEIVED (A) CREATE OR ENHANCE NONFINANCIAL
ASSETS OR (B) REQUIRE SPECIALIZED SKILLS (ACCOUNTANTS,
ARCHITECTS,
CARPENTERS,
DOCTORS,
ELECTRICIANS,
LAWYERS, NURSES, PLUMBERS, TEACHERS, ETC.), ARE
PROVIDED BY INDIVIDUALS POSSESSING THOSE SKILLS, AND
WOULD TYPICALLY NEED TO BE PURCHASED IF NOT PROVIDED
BY DONATION. CONTRIBUTED SERVICES AND PROMISES TO GIVE
SERVICES THAT DO NOT MEET THE ABOVE CRITERIA (SALVATION
ARMY BELL RINGERS) SHALL NOT BE RECOGNIZED.
E.
AN ENTITY NEED NOT RECOGNIZE CONTRIBUTIONS OF WORKS OF
ART, HISTORICAL TREASURES, AND SIMILAR ASSETS IF THE
DONATED ITEMS ARE ADDED TO COLLECTIONS THAT MEET ALL
OF THE FOLLOWING CONDITIONS:
1)
ARE HELD FOR PUBLIC EXHIBITION, EDUCATION, OR
RESEARCH IN FURTHERANCE OF PUBLIC SERVICE RATHER
THAN FINANCIAL GAIN.
2)
ARE PROTECTED, KEPT UNENCUMBERED, CARED FOR, AND
PRESERVED.
3)
ARE SUBJECT TO AN ORGANIZATIONAL POLICY THAT
8
REQUIRES THE PROCEEDS FROM SALES OF COLLECTION
ITEMS TO BE USED TO ACQUIRE OTHER LIKE ITEMS.
F.
IF COLLECTIONS ARE CAPITALIZED, CONTRIBUTED COLLECTION
ITEMS SHALL BE RECOGNIZED AS REVENUES OR GAINS.
G.
A
NOT-FOR-PROFIT
ORGANIZATION
SHALL
DISTINGUISH
CONTRIBUTIONS RECEIVED WITH PERMANENT RESTRICTIONS,
THOSE RECEIVED WITH TEMPORARY RESTRICTIONS, AND THOSE
RECEIVED WITHOUT DONOR-IMPOSED RESTRICTIONS.
H.
CONTRIBUTIONS WITH DONOR-IMPOSED RESTRICTIONS SHALL BE
REPORTED AS RESTRICTED SUPPORT; HOWEVER, DONORRESTRICTED CONTRIBUTIONS WHOSE RESTRICTIONS ARE MET IN
THE SAME REPORTING PERIOD MAY BE REPORTED AS
UNRESTRICTED SUPPORT PROVIDING THAT AN ORGANIZATION
REPORTS CONSISTENTLY FROM PERIOD TO PERIOD AND
DISCLOSES ITS ACCOUNTING POLICY.
I.
RESTRICTED SUPPORT INCREASES PERMANENTLY RESTRICTED
NET ASSETS OR TEMPORARILY RESTRICTED NET ASSETS.
CONTRIBUTIONS WITHOUT DONOR-IMPOSED RESTRICTIONS
SHALL BE REPORTED AS UNRESTRICTED SUPPORT THAT
INCREASES UNRESTRICTED NET ASSETS.
J.
RECEIPTS OF UNCONDITIONAL PROMISES TO GIVE WITH
PAYMENTS DUE IN FUTURE PERIODS SHALL BE REPORTED AS
RESTRICTED SUPPORT UNLESS EXPLICIT DONOR STIPULATIONS
OR CIRCUMSTANCES SURROUNDING THE RECEIPT OF A PROMISE
MAKE CLEAR THAT THE DONOR INTENDED IT TO BE USED TO
SUPPORT ACTIVITIES OF THE CURRENT PERIOD.
K.
A NOT-FOR-PROFIT ORGANIZATION SHALL RECOGNIZE THE
EXPIRATION OF A DONOR-IMPOSED RESTRICTION ON A
CONTRIBUTION IN THE PERIOD IN WHICH THE RESTRICTION
EXPIRES. A RESTRICTION EXPIRES WHEN THE STIPULATED TIME
HAS ELAPSED, WHEN THE STIPULATED PURPOSE FOR WHICH THE
RESOURCE WAS RESTRICTED HAS BEEN FULFILLED, OR BOTH.
L.
AS PROVIDED IN FASB 117, EXPIRATIONS OF DONOR-IMPOSED
RESTRICTIONS THAT SIMULTANEOUSLY INCREASE ONE CLASS OF
NET ASSETS AND DECREASE ANOTHER (RECLASSIFICATIONS)
ARE REPORTED SEPARATELY FROM OTHER TRANSACTIONS.
9
M.
CONTRIBUTIONS MADE (MEASURED AT THEIR FAIR VALUE) SHALL
BE RECOGNIZED AS EXPENSES IN THE PERIOD MADE AND AS
DECREASES OF ASSETS OR INCREASES OF LIABILITIES
DEPENDING ON THE FORM OF THE BENEFITS GIVEN.
N.
QUOTED MARKET PRICES, IF AVAILABLE, ARE THE BEST
EVIDENCE OF THE FAIR VALUE OF MONETARY AND
NONMONETARY ASSETS, INCLUDING SERVICE.
IF QUOTED
MARKET PRICES ARE NOT AVAILABLE, FAIR VALUE MAY BE
ESTIMATED ON QUOTED MARKET PRICES FOR SIMILAR ASSETS,
INDEPENDENT APPRAISALS, OR VALUATION TECHNIQUES, SUCH
AS PRESENT VALUE OF ESTIMATED FUTURE CASH FLOWS.
O.
CONDITIONAL PROMISES TO GIVE, WHICH DEPEND ON THE
OCCURRENCE OF A SPECIFIED FUTURE AND UNCERTAIN EVENT
TO BIND THE PROMISOR, SHALL BE RECOGNIZED WHEN THE
CONDITIONS ON WHICH THEY DEPEND ARE SUBSTANTIALLY MET.
P.
DISCLOSURE REQUIREMENTS:
1)
2)
RECIPIENTS OF UNCONDITIONAL PROMISES TO GIVE SHALL
DISCLOSE THE FOLLOWING:
a)
THE AMOUNTS OF PROMISES RECEIVABLE IN LESS
THAN ONE YEAR, IN ONE TO FIVE YEARS, AND IN
MORE THAN FIVE YEARS
b)
THE
AMOUNT
OF
THE
ALLOWANCE
UNCOLLECTIBLE PROMISES RECEIVABLE
FOR
RECIPIENTS OF CONDITIONAL PROMISES TO GIVE SHALL
DISCLOSE THE FOLLOWING:
a).
THE TOTAL OF THE AMOUNTS PROMISED
b).
A DESCRIPTION AND AMOUNT FOR EACH GROUP OF
PROMISES HAVING SIMILAR CHARACTERISTICS.
APPENDIX B
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 117, FINANCIAL
STATEMENTS OF NOT-FOR-PROFIT ORGANIZATIONS (SUMMARY)
10
A.
THE STATEMENT ESTABLISHES STANDARDS FOR GENERALPURPOSE EXTERNAL FINANCIAL STATEMENTS FOR NOT-FORPROFIT ORGANIZATIONS.
THOSE STATEMENTS INCLUDE A
STATEMENT OF FINANCIAL POSITION (BALANCE SHEET), A
STATEMENT OF ACTIVITIES (OPERATING STATEMENT), AND A
STATEMENT OF CASH FLOWS. IN ADDITION VOLUNTARY HEALTH
AND WELFARE ORGANIZATIONS ARE REQUIRED TO CONTINUE
PRODUCING A STATEMENT OF FUNCTIONAL EXPENSES. THE
STATEMENT
OF FUNCTIONAL EXPENSES IS USEFUL IN
ASSOCIATING EXPENSES WITH SERVICE EFFORTS AND
ACCOMPLISHMENTS.
B.
FINANCIAL STATEMENTS OF NOT-FOR-PROFIT ORGANIZATIONS
SHOULD PROVIDE INFORMATION TO FINANCIAL STATEMENT
USERS WHICH WILL HELP IN ASSESSING (A) THE SERVICES AN
ORGANIZATION PROVIDES AND ITS ABILITY TO CONTINUE TO
PROVIDE THOSE SERVICES, AND (B) HOW MANAGERS DISCHARGE
THEIR STEWARDSHIP RESPONSIBILITIES AND OTHER ASPECTS OF
THEIR PERFORMANCE.
C.
THE FINANCIAL STATEMENTS SHOULD PROVIDE INFORMATION
ABOUT
D.
1)
THE AMOUNT AND NATURE OF AN
ASSETS, LIABILITIES, AND NET ASSETS.
ORGANIZATION'S
2)
THE EFFECT OF TRANSACTIONS AND OTHER EVENTS AND
CIRCUMSTANCES THAT CHANGE THE AMOUNT AND NATURE
OF NET ASSETS.
3)
THE AMOUNT AND KINDS OF INFLOWS AND OUTFLOWS OF
ECONOMIC RESOURCES DURING A PERIOD AND THE
RELATION BETWEEN THE INFLOWS AND OUTFLOWS.
4)
HOW AN ORGANIZATION OBTAINS AND SPENDS CASH, ITS
BORROWING AND REPAYMENT OF BORROWING, AND
OTHER FACTORS THAT MAY AFFECT ITS LIQUIDITY.
DISCLOSURE REQUIREMENTS FOR BUSINESS ENTERPRISES
SHOULD BE APPLIED.
FOR EXAMPLE, INFORMATION ABOUT
FINANCIAL
INSTRUMENTS;
LOSS
CONTINGENCIES;
EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING
EVENTS; AND ACCOUNTING CHANGES, SHOULD BE REPORTED IN
11
NOTES TO THE FINANCIAL STATEMENTS.
E.
THE STATEMENT OF FINANCIAL POSITION:
1)
THE STATEMENT OF FINANCIAL POSITION SHALL FOCUS ON
THE ORGANIZATION AS A WHOLE AND SHALL REPORT THE
AMOUNTS OF ITS TOTAL ASSETS, LIABILITIES, AND NET
ASSETS.
2)
THE INFORMATION IN THE STATEMENT SHOULD BE AN
AGGREGATION OF ASSETS AND LIABILITIES THAT POSSESS
SIMILAR CHARACTERISTICS. EXAMPLES ARE: CASH AND
CASH EQUIVALENTS; ACCOUNTS AND NOTES RECEIVABLE;
INVENTORIES;
DEPOSITS
AND
PREPAYMENTS;
INVESTMENTS; LAND, BUILDINGS AND EQUIPMENT;
ACCOUNTS PAYABLE; AND NOTES PAYABLE.
3)
CASH OR OTHER ASSETS RECEIVED WITH A DONORIMPOSED RESTRICTION THAT LIMITS THEIR USE TO LONGTERM PURPOSES SHOULD NOT BE CLASSIFIED WITH CASH
OR OTHER ASSETS THAT ARE UNRESTRICTED AND
AVAILABLE FOR CURRENT USE.
4)
INFORMATION ABOUT LIQUIDITY SHALL BE PROVIDED BY
ONE OF THE FOLLOWING:
5)

SEQUENCING ASSETS ACCORDING TO THEIR
NEARNESS OF CONVERSION TO CASH AND
SEQUENCING LIABILITIES ACCORDING TO THE
NEARNESS OF THEIR MATURITY AND RESULTING USE
OF CASH.

CLASSIFYING ASSETS AND LIABILITIES AS CURRENT
AND NONCURRENT.

DISCLOSURE OF RELEVANT INFORMATION ABOUT
THE LIQUIDITY OR MATURITY OF ASSETS AND
LIABILITIES.
A STATEMENT OF FINANCIAL POSITION SHALL REPORT THE
AMOUNTS FOR EACH OF THREE CLASSES OF NET ASSETS PERMANENTLY RESTRICTED NET ASSETS, TEMPORARILY
RESTRICTED NET ASSETS, AND UNRESTRICTED NET
12
ASSETS. THE CLASSIFICATION IS DETERMINED BY THE
EXISTENCE
OR
ABSENCE
OF
DONOR-IMPOSED
RESTRICTIONS.
F.
THE STATEMENT OF ACTIVITIES:
1)
A STATEMENT OF ACTIVITIES SHALL FOCUS ON THE
ORGANIZATION AS A WHOLE AND SHALL REPORT THE
AMOUNT OF THE CHANGE IN NET ASSETS FOR THE PERIOD.
IT SHALL USE A DESCRIPTIVE TERM SUCH AS CHANGE IN
NET ASSETS OR CHANGE IN EQUITY. (NOTE THAT CHANGES
IN FUND BALANCE IS NOT ACCEPTABLE.)
2)
THE STATEMENT OF ACTIVITIES SHALL REPORT THE
AMOUNT OF CHANGE IN PERMANENTLY RESTRICTED,
TEMPORARILY RESTRICTED, AND UNRESTRICTED NET
ASSETS FOR THE PERIOD.
3)
INFORMATION ABOUT REVENUES, EXPENSES, GAINS,
LOSSES,
AND
RECLASSIFICATIONS
GENERALLY
IS
PROVIDED BY
AGGREGATING
ITEMS
THAT
POSSESS
SIMILAR
CHARACTERISTICS INTO REASONABLY HOMOGENEOUS
GROUPS.
4)
EVENTS THAT INCREASE ONE CLASS OF NET ASSETS AND
DECREASE ANOTHER SHALL BE REPORTED AS SEPARATE
ITEMS. (RECLASSIFICATIONS.)
5)
THE STATEMENT OF ACTIVITIES SHALL REPORT REVENUES
AS INCREASES IN UNRESTRICTED NET ASSETS UNLESS THE
USE OF THE ASSETS RECEIVED IS LIMITED BY DONORIMPOSED RESTRICTIONS. THE STATEMENT SHALL REPORT
EXPENSES AS DECREASES IN UNRESTRICTED NET ASSETS.
6)
FROM FASB 116, IN THE ABSENCE OF A DONOR'S EXPLICIT
STIPULATION, CONTRIBUTIONS ARE REPORTED AS
UNRESTRICTED REVENUES OR GAINS, WHICH INCREASE
UNRESTRICTED NET ASSETS.
DONOR-RESTRICTED
CONTRIBUTIONS ARE REPORTED AS RESTRICTED NET
ASSETS OR PERMANENTLY RESTRICTED NET ASSETS
13
DEPENDING ON THE TYPE OF RESTRICTION.
DONORRESTRICTIONS WHICH ARE MET IN THE SAME REPORTING
PERIOD MAY BE REPORTED AS UNRESTRICTED SUPPORT
PROVIDED
THAT
AN
ORGANIZATION
REPORTS
CONSISTENTLY FROM PERIOD TO PERIOD AND DISCLOSES
ITS ACCOUNTING POLICY.
G.
7)
THE STATEMENT SHALL REPORT GAINS AND LOSSES
RECOGNIZED ON INVESTMENTS AND OTHER ASSETS (OR
LIABILITIES) AS INCREASES IN UNRESTRICTED NET ASSETS
UNLESS THEIR USE IS TEMPORARILY OR PERMANENTLY
RESTRICTED BY EXPLICIT DONOR STIPULATIONS OR BY
LAW.
8)
WITHIN A CLASS OR CLASSES OF CHANGES IN NET ASSETS,
AN ORGANIZATION MAY CLASSIFY ITEMS AS OPERATING
AND NONOPERATING, EXPENDABLE AND NONEXPENDABLE,
EARNED
AND
UNEARNED,
RECURRING
AND
NONRECURRING, OR IN OTHER WAYS.
9)
THE STATEMENT SHALL REPORT GROSS AMOUNTS OF
REVENUES AND EXPENSES FOR MAJOR OR CENTRAL
OPERATIONS AND ACTIVITIES. HOWEVER, INVESTMENT
REVENUES MAY BE REPORTED NET OF RELATED
EXPENSES, SUCH AS CUSTODIAL FEE, ETC.
A STATEMENT OF ACTIVITIES OR NOTES TO FINANCIAL
STATEMENTS SHALL PROVIDE INFORMATION ABOUT EXPENSES
REPORTED BY THEIR FUNCTIONAL CLASSIFICATION SUCH AS
MAJOR CLASSES OF PROGRAM SERVICES AND SUPPORTING
ACTIVITIES. VOLUNTARY HEALTH AND WELFARE ORGANIZATIONS
SHALL REPORT THAT INFORMATION AS WELL AS INFORMATION
ABOUT EXPENSES BY THEIR NATURAL CLASSIFICATION, SUCH AS
SALARIES,
RENT,
ELECTRICITY,
INTEREST
EXPENSE,
DEPRECIATION, PROFESSIONAL FEES, ETC., IN MATRIX FORMAT
IN A SEPARATE FINANCIAL STATEMENT. OTHER NOT-FOR-PROFIT
ORGANIZATIONS ARE ENCOURAGE, BUT NOT REQUIRED, TO
PROVIDE INFORMATION ABOUT EXPENSES BY THEIR NATURAL
CLASSIFICATION.
PROGRAM SERVICES ARE THE ACTIVITIES THAT RESULT IN
GOODS AND SERVICES BEING DISTRIBUTED TO BENEFICIARIES,
CUSTOMERS, OR MEMBERS THAT FULFILL THE PURPOSE OR
MISSION OF AN ORGANIZATION. EXAMPLES FOR A VHWO MIGHT
BE HEALTH SERVICES, RESEARCH, DISASTER RELIEF, PUBLIC
14
EDUCATION, ETC.
SUPPORTING ACTIVITIES ARE ALL OTHER ACTIVITIES NOT
CLASSIFIED AS PROGRAM. THEY INCLUDE MANAGEMENT AND
GENERAL (BUSINESS MANAGEMENT, ACCOUNTING, BUDGETING
FINANCING, AND RELATED ADMINISTRATIVE ACTIVITIES ), FUNDRAISING
(PUBLICIZING
AND
CONDUCTING
FUND-RAISING
CAMPAIGNS, MAINTAINING DONOR MAILING LISTS, PREPARING
AND DISTRIBUTING FUND-RAISING MANUALS, ETC.), AND
MEMBERSHIP DEVELOPMENT ACTIVITIES (SOLICITING FOR
PROSPECTIVE MEMBERS, MEMBERSHIP DUES, ETC.)
H.
A STANDARD STATEMENT OF CASH FLOWS IS REQUIRED. THE
STATEMENT IS TO INCLUDE THE THREE CATEGORIES (
OPERATIONS, INVESTING AND FINANCING) REQUIRED BY
BUSINESSES IN FASB STATEMENT 95.
FASB 117 ADDRESSES THE DISPLAY OR PRESENTATION OF FINANCIAL
STATEMENTS. FASB 117 DOES NOT PRESCRIBE THE ACCOUNTING
PROCEDURES WHICH MUST BE FOLLOWED.
THEREFORE, IT IS
ANTICIPATED THAT MANY HEALTH CARE ORGANIZATIONS, COLLEGES
AND UNIVERSITIES AND OTHER NOT-FOR-PROFIT ORGANIZATIONS WILL
CONTINUE TO FOLLOW FUND ACCOUNTING PROCEDURES DURING THE
ACCOUNTING PERIOD AND, THEN, FOLLOW FASB 117 IN PREPARING THE
FINANCIAL STATEMENTS.
FASB 117 PROVIDES ALTERNATIVE FINANCIAL STATEMENTS DISPLAYS.
15