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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