Transcript
04/28/23 www.cpafirmsupport.com 1
Key Accounting & Reporting Issues for Nonprofits: Introduction, Overview and the Statement of Financial Position
Presented by Larry L. Perry, CPA CPA Firm Support Services, LLC
04/28/23 www.cpafirmsupport.com 2
Learning Objectives
Describe fundamental definitions and operating principles of nonprofit organizations
Review SFASs for nonprofit organizations Describe basic financial statements and footnotes
presentations for nonprofit organizations Explain principles of accounting and reporting for
accounts in the statement of financial position
04/28/23 www.cpafirmsupport.com 3
Definitions of Nonprofit Organizations
SFAS Nos. 116 and 117 (ASC 958)
Examples of non-profit organizationso Types of nongovernmental, nonprofit organizationso Type of voluntary health and welfare organizations
Internal Revenue Serviceo Common IRS classifications
04/28/23 www.cpafirmsupport.com 4
SFAS No. 116 (ASC 958)—Accounting for Contributions
Contributions received are recognized as revenues in the period received at fair valueso Includes unconditional promises to give
Contributions made are recognized as expenses in the period made at their fair valueso Includes unconditional promises to give
Conditional promises are recognized when they become unconditional
Restricted contributions are recorded and recognized according to time and purpose restrictions
In-kind contributions of materials, professional services, and free space are recorded at fair values when received
Contributions of collectibles are recorded as revenues at fair values if NPO capitalizes collectibles
04/28/23 www.cpafirmsupport.com 5
SFAS No. 117 (ASC 958)—Financial Statements for NPOsRequires:
• Statement of Financial Position• Statement of Activities• Statement of Cash Flows• Statement of Functional Expenses (required
only for VHWOs-but can be elected by others)• Classifications are based on the existence or
absence of donor-imposed restrictions
04/28/23 www.cpafirmsupport.com 6
SFAS No. 124 (ASC 958)—Accounting for Certain Investments Requires fair value accounting and reporting
for:o Investments in equity securities with readily
determinable fair valueso All investments in debt securities
Requires certain disclosures about investments, including investment returns
04/28/23 www.cpafirmsupport.com 7
Polling Question No. 1
Which of the following are required by nonprofit GAAP? A. Financial statements are required to be
comparative B. SAS No. 117 requires fund accounting C. Net assets classifications are based on donor
restrictions D. None of the above
04/28/23 www.cpafirmsupport.com 8
Accounting Standards—Cash and Cash Equivalents Same descriptions are required on statements of
financial position and cash flows Restricted amounts should be presented
separately Only includes cash equivalents with maturity dates
of three months or less at time of purchase (to prevent fair value from changing)
04/28/23 www.cpafirmsupport.com 9
Promises to Give
Include oral and written agreements
Recipient has right to expect transfer of assets in future and donor has enforceable obligation to give
Donors receive no tangible benefits
Recorded net of estimates of uncollectible amounts in receivables and revenues
04/28/23 www.cpafirmsupport.com 10
Intentions to Give
Promises that aren’t legally enforceable are intentions to give
Revocable or modifiable trust instruments are normally intentions to give
Intentions to give are not recorded but may be disclosed
04/28/23 www.cpafirmsupport.com 11
Unconditional & Conditional Promises to Give Promise must be evidenced in some way
o Identification of the donoro Contact informationo Amount of the gift
If an unconditional promise is for a future period, it would be recorded as a restricted gift
Unconditional promises would be reclassified to unrestricted when the time restriction is reached, not when payment is received
Promises to give receivable in less than one year are recorded at their fair value
Cash promises beyond one year would be discounted to present value Promise to give marketable securities would be valued under SFAS No.
157 (ASC 820) Promises to give non-financial assets in a current year would be
recorded at net realizable value; best estimate of fair value would used for future gifts
Conditional promises become unconditional when condition is satisfied (such as for a matching grant)
04/28/23 www.cpafirmsupport.com 12
Polling Question No. 2
Which of the following criteria are necessary for recording promises to give and contributions revenue? A. Non-cash contributions must be received or
promised B. Contributions must be unconditional C. A promise must be legally enforceable D. All of the above E. None of the above
04/28/23 www.cpafirmsupport.com 13
Accounts Receivable & Inventories
Accounts receivable are recorded similar to for-profit entities
Inventorieso Nonprofit GAAP requires cost basis for
purchases, fair value for giftso Nonprofit GAAP permits estimates, averages
and approximations
04/28/23 www.cpafirmsupport.com 14
Property and Equipment Purchases are recorded at cost Donations are recorded at fair value at date of gift Purchases with restricted funds or donations with restricted use
would be classified and disclosed as restricted net assets if the documentation of the gift specifies the restrictions
Gains or losses upon disposition would be unrestricted unless specified otherwise by donor
Donations with long-term restrictions are financing activities in statement of cash flows
First-time capitalization of property and equipment should be recorded at historical cost for purchases and fair value at date of donation.
Fully-depreciated assets’ cost and accumulated depreciation may or may not be recorded at initial capitalization
Depreciation is required
04/28/23 www.cpafirmsupport.com 15
Collections
Include works of art, rare books and documents, and other items held for display or study
May be acquired with restricted funds and should be accounted for in accordance with donor restrictions
May be capitalized or not in accordance with reporting entity’s policy—all or none
May record contributions only if policy is to capitalize First-time capitalization permits use of valuation information
that is easiest to obtain Collections are not normally depreciated
04/28/23 www.cpafirmsupport.com 16
Liabilities
Accounting principles are generally the same as for-profit GAAP—short and long liabilities
Guaranteeso Non-contingent guarantees must be recorded under
FIN 45 (ASC 460)
Deferred revenue—recorded when earned and matched with related costs
Refundable advances—funds received from third party (usually grants) and related goods or services have not be provided
04/28/23 www.cpafirmsupport.com 17
Net Assets and Reclassifications
SAS No. 117 (ASC 958) requires:o Unrestricted (may include board designations)o Temporarily restricted as to time or purposeo Permanently restricted by agreement
Temporarily restricted net assets are reclassified to unrestricted when time or purpose restrictions are satisfied. Expenses are recorded as unrestricted.
Income from permanently restricted net assets is classified as unrestricted unless specified otherwise by donor.
04/28/23 www.cpafirmsupport.com 18
Polling Question No. 3 Which of the following are true for non-profit GAAP?
A. Valuations for inventories can be estimated B. Capitalized art work would not be depreciated C. Promises to give are presented net of
uncollectibles D. Net assets accounting is based on donor
restrictions E. All the above F. None of the above
04/28/23 www.cpafirmsupport.com 19
Illustrative Statement of Financial Position—Key Issues Presentation can be classified or non-classified,
whichever is most meaningful Asset restrictions must be noted on statement or in a
footnote Comparative is most meaningful but not required Line item references to footnotes aren’t required but
bottom reference to notes is required Board designations of unrestricted net assets can be
disclosed on statement or in footnotes
www.cpafirmsupport.com Slide 18
04/28/23 www.cpafirmsupport.com 20
Illustrative Disclosures for Statement of Financial Position Note A
Basis of Presentation Inventory of Merchandise and Supplies Property and Equipment Use of Estimates Cash
Note B—Investments Note C—Property and Equipment Note D—Related Party Transactions Note E—Debt Obligations Note F—Restricted Net Assets
04/28/23 www.cpafirmsupport.com 21
Polling Question No. 4
Non-profit GAAP is presented in Topic 958 of the FASB Accounting Standards Codification and in updated pre-codification SFASs A. True B. False
04/28/23 www.cpafirmsupport.com 22
The End What to do if you want more
Email Larry Perry: larry@cpafirmsupport.com with questions
Visit www.cpafirmsupport.com for webcast resources Read Larry Perry’s weekly articles/blog, Today’s World of
Audits, at www.accountingweb.com under the A&A and Bloggers tabs for small audit and other subjects
Watch for Larry Perry’s Performing Small Audits, Reviews and Compilations for Entities using the AICPA’s FRF for SMEs from Wiley & Sons in 2015
top related