How should a nongovernmental not-for-profit organization classify gains and losses

How do non-profits pool their investments?

Non-profit organizations such as churches may pool all investments of various internal accounting funds, but must equitably allocate realized and unrealized gains and losses to net asset classifications as appropriate.

What are does operating activities consist of?

applicable agency transactions,

unrestricted cash contributions,

program income,

and interest income or dividend income from investments.

How should a not-for-profit organization report depreciation expense in its statement of activities?

Depreciation is recorded in accordance with generally accepted accounting principles. Operating expenses, such as depreciation, are recorded as unrestricted and serve to decrease unrestricted net assets.

Which not-for-profit entities is required to prepare a statement of functional expense?

Choice "d" is correct. The statement of functional expenses is required for voluntary health and welfare organizations but is optional for all others. The best example of a voluntary health and welfare organization of the three choices given is a shelter for the homeless, the organization that likely receives most of its operating income from general donations and is organized to improve the overall health and welfare of a specific segment of society.

How are good faith donations recognized?

Good faith deposits associated with conditional promises would be recorded as a liability titled "refundable advance." The use of the $1,000,000 gift is conditional upon raising matching funds from others. Until the matching funds are received (or the condition has been substantially met), the monies contributed are payable back to the donor. No revenue is recognized

Supporting services consist of?

fund raising
administration
management
membership development

Salaries for fund raisers would be classified as support.

How should unconditional pledges received by a not-for-profit organization that will be collected over more than one year be reported?

Pledges receivable, valued at their present values.

How should a not-for-profit organization report donor-restricted cash contributions for long-term-purposes in its statement of cash flows?

Financing activity inflow.

How should stock be recorded?

The stock should be recorded at fair value at year end

How should operating expenses for a nongovernmental not-for-profit organization be reported?

Operating expenses are decreases in unrestricted net assets

What is the difference between program and support expense?

Program services relate to the mission or service delivery objectives of the organization, while support services relate to costs that indirectly support the organization's mission such as general and administrative costs, fund raising, membership development, etc.

What is the treatment of donor imposed restrictions that have been met?

Rule: Donor-imposed restrictions that are met in the same period they are received may be recorded as unrestricted support (contribution revenue), provided that the organization discloses and consistently applies this accounting policy.

How are proceeds from sale of artwork recorded?

Investing activities include proceeds from the sale of works of art or purchases of works of art.

How do you account for contributed utilities?

Rule: The simultaneous receipt and use of utilities is a form of contributed assets and not services. The foundation would recognize the fair value of the contributed electricity as both revenue and expense in the period it is received

How are multi-year pledges recorded?

Multiyear pledges are recorded at their net present value at the date the pledge is made. Thus, multiyear pledges should be discounted. Multiyear pledges have an implied time restriction and are temporarily restricted.

How are money pledged by a donor to another non-profit accounted for?

monies pledged by the donor to another not-for-profit organization as an asset and as a liability to that other organization. Recipients that do not have variance power (do not have any latitude with regard to use of the funds received) would recognize the asset received as a liability to the beneficiary.

How are treasury bill recorded?

Treasury bills are reported at their fair value of on the statement of financial position.

All debt securities that have readily determinable fair values are measured at fair value in the statement of financial position.

Which types of information would be included in total net assets in the statement of financial position for a nongovernmental not-for-profit organization?

unrestricted, temporarily restricted, or permanently restricted net assets.

How should a nongovernmental not-for-profit organization classify gains and losses on investments purchased with permanently restricted assets?

Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increases or decreases in unrestricted net assets.

What is the primary purpose of the statement of activities of a nongovernmental not-for-profit organization?

To report the change in net assets for the period.

How should a nongovernmental not-for-profit organization report investments in its financial statements?

Fair value with gains and losses reported in the statement of activities.

How are pledges to be used at a later period accounted for?

A pledge received by a not-for-profit to be used in a future period would most likely be recorded as temporarily restricted pledge receivable and temporarily restricted support. The temporary restriction is implied by time (monies are not yet received).

What is the journal entry for promises to give?

Pledge Receivable
Allowance for Doubtful Accounts
Contribution Revenue

Note that the examiners have asked for total revenues without respect to classification. The collection of a portion of the pledge prior to year end is irrelevant.

When are non-profit organizations considered interelated?

In order for not-for-profit organizations to be financially interrelated as defined by FASB ASC 958-605, their relationship must share both characteristics: one organization must be able to influence the operating and financial decisions of the other AND have an ongoing economic interest in the net assets of the other.

Which classifications is required for reporting of expenses by all not-for-profit organizations?

Functional classification in the statement of activities or notes to the financial statements.

What conditions must be met in order for a non-profit to not capitalize works of art, capital treasures, etc.?

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:
Are held for public exhibition, education, or research in furtherance of public service rather than financial gain.

Are protected, kept unencumbered, cared for, and preserved.

Are subject to an organizational policy that requires the proceeds from sale of collection items to be used to acquire other items for collections.

Can no-for-profit organizations pool their investments?

Non-profit organizations such as churches may pool all investments of various internal accounting funds, but must equitably allocate realized and unrealized gains and losses to net asset classifications as appropriate.

How are revenues recognized?

The amount reported as unrestricted revenues, gains and other support on the statement of activities of a not-for-profit hospital would include all income earned by the hospital and any amounts released from restriction. Charity care, those health care services provided but never expected to result in cash flows to the hospital, are not recorded as receivable or as revenue. Charity care is not recognized on the face of the financial statements but is disclosed.