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Chapter 16 Lecture. GASB. GOVERNMENT NFPs. FASB. PRIVATE NFPs. There (2) kinds of private NFPs. VHWO. ONPO. NOT hospitals, colleges, universities. Voluntary Health & Welfare Organizations. Other Not-for-Profit Organizations. Private NFPs follow THE FASB. FAS 116 FAS 117.

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Chapter 16

Lecture


GASB

GOVERNMENT NFPs

FASB

PRIVATE NFPs


There (2) kinds of private NFPs

VHWO

ONPO

NOT hospitals, colleges, universities

Voluntary Health & Welfare Organizations

Other Not-for-Profit Organizations


Private NFPs follow THE FASB

FAS 116

FAS 117

“Accounting for Contributions Received and Contributions Made”.

“Financial Statements of NFP organizations”.


Classes of Net Assets

Accounting equation: ASSETS = LIABILITIES + NET ASSETS

ACCRUAL BASIS

(3) classes

UNRESTRICTED NET ASSETS:.

NOT temporarily or permanently restricted

TEMPORARILY RESTRICTED:

DONOR-IMPOSED restriction on the TIMING

and/or PURPOSE OF USE of donated resource.

PERMANENTLY RESTRICTED:

DONOR-IMPOSED restriction that is PERMANENT

IN NATURE (restrictions cannot be fulfilled by

either passage of time or by actions of the

organization).


ILLUSTRATION OF CLASSIFICATION OF NET ASSETS

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

NOTE: This unrestricted resources has aspects

of restriction and that is noted with a footnote.

DESIGNATED is again an internal designation


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U

TR


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U

TR

TR


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U

TR

TR

TR


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U

TR

TR

TR

TR


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U

TR

TR

TR

TR

PR


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U

TR

TR

TR

TR

PR

U


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U

TR

TR

TR

TR

PR

U

PR

so net to “U”

is 15,500,000


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TR

U

U

TR

TR

TR

TR

PR

U

because its not

a donor restriction

U

PR

so net to “U”

is 15,500,000


CLASSIFY as to UNRESTRICTED (U), TEMPORARILY RESTRICTED (TR),

OR PERMANENTLY RESTRICTED (PR)

Permanent: $50,000,000 + $1,500,000 = $51,500,000

A nongovernment VHWO or ONPO has the following resources:

Resources restricted for use in future years but

not restricted to a specific purpose……………………..$1,300,000

Unrestricted resources designated for plant

expansion……………………………………………………. 3,000,000

Undesignated, unrestricted resources…………………. 9,000,000

Resources restricted BY DONORS for:

Scholarships………………………. $4,000,000

Research………………………… 10,000,000

Plant Expansion……………….. 5,000,000

Term Endowments…………. 2,000,000

Permanent Endowments….. 50,000,000

Resources invested in fixed assets (net of related

accumulated depreciation and debt)…………. 17,000,000

Resources restricted by bond indenture for

plant expansion………………………………….. 4,500,000

Additional information provided indicates that land with a recorded value of $1,500,000

must be used for the purposes of the organization in perpetuity.

TEMPORARY: $1,300,000 + $4,000,000 + $10,000,000 + $5,000,000 + $2,000,000

= $22,300,000

TR

U

UNRESTRICTED: $3,000,000 + $9,000,000 + 15,500,000 + $4,500,000 = $32,000,000

U

TOTAL NET ASSETS…………………….. $105,800,000

TR

TR

TR

TR

PR

U

because its not

a donor restriction

U

PR

so net to “U”

is 15,500,000


Financial Statements (TR),

1. Statement of Financial Position (Balance Sheet).

2. Statement of Activities.

3. Statement of Cash Flows.

4. Statement of Functional Expenses required for VHWO.


Present aggregated totals (TR),

of ASSETS, LIABILITIES and

NET ASSETS


Present UNRESTRICTED, (TR),

TEMPORARILY RESTRICTED

& PERMANENTLY RESTRICTED.


INVESTMENTS are recorded (TR),

at COST or FMV if donated.

Subsequent FMV accounting

Usually UNRESTRICTED NA

increase


Receivables = PLEDGES (TR),

Pledge is UNCONDITIONAL

PROMISE TO GIVE.

Pledges Receivable........$XX.XX

Pledge Revenue...........$XX.XX

* Conditional pledges:

Are disclosed in notes.


FIXED assets are recorded (TR),

at COST if purchased;

FMV if donated.


LIABILITIES and (TR),NET ASSETS also presented



REVENUES and GAINS (TR),

reported by SOURCE


EXPENSES reported (TR),

by FUNCTION



ALL EXPENSES are listed SEPARATELY

with UNRESTRICTED!!!!


Temporarily restricted NA must be SEPARATELY

released to Unrestricted NA before

they can be spent.


CONTRIBUTIONS recognized as SEPARATELY

revenue in period unconditionally

promised and/or received as either

UR, TR or PR.


Restriction issues: SEPARATELY

CONTRIBUTIONS

If contribution given with temporary restriction, however, that restriction is met in the same

period that revenues are recognized:

(2) ways to recognize:

DECREASE

TEMPORARILY

RESTRICTED

INCREASE

UNRESTRICTED

INCREASE

TEMPORARILY

RESTRICTED

METHOD

1

satisfy

restriction

or

INCREASE

UNRESTRICTED

METHOD

2


CONDITIONAL PLEDGE SEPARATELY –> REVENUE WHEN CONDITIONS ARE MET

UNCONDITIONAL PLEDGES DUE IN FUTURE YEARS (even if not restricted)

are recognized as revenue NOW (but as temporarily restricted).

* shown as unrestricted revenue if donor says pledge is for use this year.



Recognized as revenue SEPARATELY

only if:

  • Require specialized skills.

  • Provided by individuals

  • with those skills.

  • -Would typically have to be

  • purchased if not donated.

DONATED GOODS & SERVICES are reported at

FMV at time of contribution and expense when

used or sold.


DO NOT relate directly to NPO’s mission

(general administration, membership

development, fund-raising).

EXPENSES shown as PROGRAM SERVICE

or SUPPORT SERVICE.



OPERATING SEPARATELY

INVESTING

& FINANCING

very similar

to FAS 95.


ILLUSTRATION OF NON-GOVERNMENT NFP ACCOUNTING SEPARATELY

  • Contributions of $3,000,000 (including $250,000 of pledges not collected by year

  • end) were received from donors during the year without restriction.

  • 250K which is without restriction is still reported as restricted because cash is not

  • in (unless donor specifies pledge is for this year-then its unrestricted revenue)

Cash……………. $2,750,000 (for simplicity assume pledge is only receivable)

Pledges Receiv.. 250,000

Unrestricted Revenue………………….. $2,750,000

Temporarily Restricted Revenue……. $ 250,000

  • Contributions of $1,000,000 restrictedfor public presentations were received

  • in cash during the year.

Cash……….$1,000,000

Temporarily restricted revenue……….$1,000,000

  • The foundation received gifts of $10M to establish a permanent endowment

  • to be used to generate resources for the foundation’s community service

  • programs.

Cash……..$10,000,000

Permanent restricted revenue…….. $10,000,000


  • Income SEPARATELYrestricted for specific community service programs was earned

  • on the permanent endowment, $320,000 (assume cash).

Cash………….$320,000

Temporary restricted investment income……..$320,000

5. Computers were purchased from unrestricted resources, $72,000.

Computers……………… $72,000

Cash……………………………$72,000

* purchase doesn’t show on Statement of Activity.

  • A fund-raising banquet was held. Revenues (unrestricted) were $290,500 and

  • direct costs of the banquet totaled $97,500. Assume all cash.

Cash……….$290,500

Unrestricted special events revenue………$290,500

Unrestricted direct cost of event……$97,500

Cash……………………………………….$97,500


Cash………..$1,500,000

Temporarily restricted contribution revenue…….$1,500,000

8. Membership dues, for which members receive no benefits total $75,000.

Cash……………….$ 75,000

Unrestricted membership dues revenue………..$75,000

9. Unrestricted investment income earned totaled $83,400.

Cash………… $83,400

Unrestricted investment income…………… $83,400


  • Expenses contributions are incurred for mailings, brochures, and other items for the purpose

  • of soliciting donations totaled $95,000. Assume cash.

Supporting service expense (fundraising)..$95,000

Cash……………………………………………..$95,000

11. Administrative costs incurred during the year totaled $253,000. Assume cash.

Supporting service expense (mgt & gen)…….. $253,000

Cash……………………………………………….$253,000

  • Community service program expenses payable from restricted gifts totaled

  • $220,000. Other expenses for community service programs totaled $2,110,000.

  • Expenses for the foundation’s education programs totaled $200,000, and expenses

  • for its public presentations program were $555,000.

Temporarily Restricted NA-

Reclassifications out…$775K

Unrestricted NA-

Reclassifications

In………………….…….$775K

Unrestricted community service expenses $2,330,000

Unrestricted education expenses…………. 200,000

Unrestricted public presentation expenses.. 555,000

Cash………………………………………………….. $3,085,000

Need to rollover $775K of restricted gifts into unrestricted

in order to be able to spend them. The other expenses are assumed to already be coming from unrestricted.


13. Costs incurred on the construction of the activity center totaled $922,000.

Construction in progress……..$922,000

Cash……………………………..$922,000

  • Unrestricted pledges made by contributors in the prior year but collected

  • in the current year totaled $135,000.

Cash…………… $135,000

Pledges receivable……….. $135,000

Temporarily restricted net assets-

Reclassification Out…………… $135,000

Unrestricted NA-

Reclassifications IN………$135,000

  • Unrestricted NA, January 1, 20X3, were $1,400,000.

  • Need this to make Statement of Activity.


  • There were no permanent endowments at the BOY.

  • Again, need this to make Statement of Activity.

  • The foundation reports restricted gifts and income as increases in temporarily

  • restricted net assets even if the restriction is satisfied in the year the gifts or

  • income are initially recorded.


NFP Name $303,000.

Statement of Activity

For the Year Ended December 31, 20X3

CHANGE IN UNRESTRICTED NET ASSETS

Revenues and gains:

Contributions……………………………………………………….. $2,750,000

Special Events…………………………….. $290,500

Less: Direct costs of special events.. (97,500) 193,000

Membership dues………………………………………………….. 75,000

Investment income………………………………………………… 83,400

Total revenue and gains……………………………. $3,101,400

Net assets released from restrictions……………………… 910,000 (total from

entries)

Increase in unrestricted NA………………………………. $4,011,400

Expenses:

Program services:

Community service………………………… $2,330,000

Public presentations………………………. 555,000

Education……………………………………. 200,000

Total program services………………………………… $3,085,000

Supporting services:

Management & general…………………………………….. 253,000

Fund raising………………………………………………….. 95,000

Total supporting services……………………………….. 348,000

Total expenses…………………………………………….. $3,433,000

Net increase in unrestricted net assets………………. $ 578,400


NFP Name $303,000.

Statement of Activity

For the Year Ended December 31, 20X3 (continued)

CHANGE IN TEMPORARILY RESTRICTED NET ASSETS:

Contributions………………………………………………. $2,750,000

Investment income………………………………………… 320,000

Net assets released from restrictions…………………. ( 910,000)(from entries)

Increase in temporarily restricted NA……………….... $2,160,000

CHANGES IN PERMANENTLY RESTRICTED NET ASSETS:

Contributions…………………………………………. $10,000,000

INCREASE IN NET ASSETS………………………………… $12,738,400

Net assets at January 1…………………………………….. $1,703,000

Net assets at December 31………………………………… $14,441,400

  • Unrestricted NA, January 1, 20X3, were $1,400,000.

  • Need this to make Statement of Activity.

  • Temporarily restricted net assets, January 1, 20X3 were $303,000.

  • Again, need this to make Statement of Activity.


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