1. Chapters 12 Learn presentation and recognition of: NFPs Health Care Organizations Universities

2. NFPs Charities Hospitals Churches Professional Societies AICPA

3. NFPs NFP Full Accrual With Restrictions

4. Financial Statements Balance Sheet Statement of Activities Statement of Cash Flows Statement of Functional Expenses Page 508 Page 511 Page 516 Page 513

5. Categorization Unrestricted Operating funds Temporarily Restricted for a period of time by the donor, to be used for set purpose Permanently Restricted Donor Restricted Never Spent

6. NFP Statement of Financial Position In addition to Total assets, Total liabilities, and Total Unrestricted net assets, ASC 958 requires Net Assets in three categories: Unrestricted net assets Temporarily Restricted net assets Permanently restricted net assets (May be restricted by time, purpose, or event) Net assets rather than equity!! Classified as current and non-current

7. Statement of Activities Three categories Unrestricted Temporarily restricted Permanently restricted All expenses must be recognized in the Unrestricted fund, so funds that have been restricted must be released from the Restricted fund and transferred to the Unrestricted.

8. Statement of Cash Flow Three Sections Operating Investing Financing Recommended direct method Exception: Contributions for long term purposes, endowments, capital assets and any earnings on those funds are financing activities. See Table 12-4, note differences in financing section

9. Recognition Rules Revenue is recognized when donated or contingency is met Revenue from exchange transactions recognized in unrestricted fund Expenses recognized when incurred All expenses recognized in unrestricted fund All types of assets on the statement of Financial position All types of liabilities also recognized

10. NFP Revenue Exchange transactions follow FASB rules Pledges (ASC 958) Collect current year - use allowance Collect within 1 year - NRV More than one year out - PV and in temporarily restricted fund Conditional pledge - disclosed, recognized as revenue when condition met Released from any restrictions when collected

11. Entries Unrestricted fund, when no restrictions Placed on donations: Pledges receivable $100,000 Revenues from contribution $97,000 Allowance for uncollectible3,000 When collected: Cash $50,000 Pledges receivable $50,000

12. Entries Temporarily Restricted by time or purpose: When Pledged: (TR) Pledges Receivable $75,000 Allowances for uncollectible pledges $ 5,000 Revenues from pledges $70,000 When restriction met and collected: (TR) Pledges released from restriction $60,000 Cash $60,000 Unrestricted fund – used for intended purpose: Cash (Expense) $60,000 Pledges released from restriction$60,000

13. More than one year in future Use present value of 4 future payments of $100,000: When made (TR): @ 10% (3.170) Pledges receivable $317,000 Deferred revenue (PV)$317,000 When collected (TR): Resources released (PV)$ 68,300 Pledges receivable (PV) $ 68,300 Unrestricted fund: Cash$100,000 Resources released from restriction$ 68,300 Interest Revenue$ 31,700

14. Donated Services Not recognized unless professional services which would otherwise be purchased Criteria for recognition Create or enhance financial assets For specialized skills Entry: (accounting services) Salaries Expense1,500 Contributions 1,500

15. Intermediary Org If donations held to be transferred to another organization If other organization is specified, then recognized asset and liability If other organization not specified and discretion is explicit then revenue. This is Variance power. Type of Organization Specified Temp.Res.

16. NFP Expenses Recognized using FASB rules Depreciation of capital assets By function Total disclosed Gains and losses recognized All All recognized in unrestricted fund

17. Investments Marked to market Unrealized gains/losses recognized in revenue Investments Investment earnings Don’t use the FASB categories Realized gains/losses only those incremental over last statement date Gains/losses recognized in unrestricted for investments held in temporarily restricted Can also use equity method

18. Assets not listed Don’t need to capitalize if held for exhibit For educational, exhibition, or research Will be preserved and protected Policy is if asset is sold, the proceeds will be used to purchase other collectibles

19. Consolidations If more than one unit, consolidate with eliminations Consolidation rules: controlling financial interest control of board and substantial economic interest May consolidate if control is by other means than financial (contract) New rules on consolidation and definition of control

20. Financial Health Liquidity ratios Debt to assets Unrestricted net assets to expenses Surpluses vs. deficits Program expenses to revenues Fund-raising expenses to revenues