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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

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Non government npos
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
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
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
SFAS Number 116

  • Miscellaneous

    • Services

      • Whenever the service (1) creates or enhances non-financial 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
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 1171
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
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
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
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 re-direct the funds)

  • Recorded as a revenue (contribution) if donor organization has control (alternative use)


Npo accounting quirks
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
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 continued1
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
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 FASB

    Govt Supported Non-Govt Supported (most)


Vhwo s continued
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 continued1
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
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
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


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