non-government npos

Non-Government NPOsNon-Government NPOsFollows Non-governmental Follows Non-governmental Hierarchy shown on pp 4-5Hierarchy shown on pp 4-5

But FASB did very little to develop But FASB did very little to develop financial accounting standards for financial accounting standards for Non-governmental NPOs until Non-governmental NPOs until recentlyrecently

AICPA developed early NPO AICPA developed early NPO standards through Audit Guidesstandards through Audit Guides

Present and Potential Donors are Present and Potential Donors are primary users of financial primary users of financial statementsstatements

SFAS Number 93-Depreciation (1987)SFAS Number 93-Depreciation (1987)

Required that all NPO’s under FASB jurisdiction Required that all NPO’s under FASB jurisdiction record depreciation annually in the accounts on record depreciation annually in the accounts on long-lived assets.long-lived assets.

So, a private college or university must record So, a private college or university must record depreciation, but at the time of SFAS #93, a depreciation, but at the time of SFAS #93, a governmentally owned college or university did governmentally owned college or university did not have to. Distorted comparability function.not have to. Distorted comparability function.

GASB #35 changed this for governmentally GASB #35 changed this for governmentally owned colleges and universitiesowned colleges and universities

SFAS Number 116 (1993)SFAS Number 116 (1993)

Contributions ReceivedContributions Received Unconditional- FMV when receivedUnconditional- FMV when received Conditional-FMV when conditions are metConditional-FMV when conditions are met

Matching GiftMatching Gift

Contributions Made: Expense when Contributions Made: Expense when made or conditions met.made or conditions met.

CategoriesCategories Permanently RestrictedPermanently Restricted Temporarily RestrictedTemporarily Restricted UnrestrictedUnrestricted

SFAS Number 116SFAS Number 116

MiscellaneousMiscellaneous ServicesServices

Whenever the service (1) creates or enhances non-Whenever the service (1) creates or enhances non-financial assets or (2) requires specialized skills, is financial assets or (2) requires specialized skills, is provided by someone possessing those skills, and provided by someone possessing those skills, and typically would be purchased if not provided freetypically would be purchased if not provided free

Works of art, etcWorks of art, etcMay or may not be recordedMay or may not be recorded

If not recorded, extensive notes to financial If not recorded, extensive notes to financial statements used for disclosurestatements used for disclosure

If sold, proceeds must be used to acquire other If sold, proceeds must be used to acquire other collections for viewing by the publiccollections for viewing by the public


Requires NPO Financial StatementsRequires NPO Financial Statements Statement of Financial PositionStatement of Financial Position Statement of ActivitiesStatement of Activities Statement of Cash FlowsStatement of Cash Flows Statement of Functional Expenses for Statement of Functional Expenses for VHWOsVHWOs

Statement of Financial PositionStatement of Financial Position AssetsAssets LiabilitiesLiabilities Net AssetsNet Assets

Permantly restricted, temporarily restricted, unrestricted Permantly restricted, temporarily restricted, unrestricted (Page 290)(Page 290)


Statement of Activities (Page 289)Statement of Activities (Page 289) Revenues-Gain-Expenses-LossesRevenues-Gain-Expenses-Losses Change in organization’s net assetsChange in organization’s net assets

Permanently restrictedPermanently restricted

Temporarily restrictedTemporarily restricted

UnrestrictedUnrestricted

Statement of Cash Flows (Page 291)Statement of Cash Flows (Page 291)Cash & Cash EquivalentCash & Cash Equivalent

3 categories similar to business.3 categories similar to business.


This statement requires that investments in This statement requires that investments in equity securities with readily determinable fair equity securities with readily determinable fair values and all investments in debt securities be values and all investments in debt securities be reported at fair value with gains and losses reported at fair value with gains and losses included in a statement of activities.included in a statement of activities.

Originally SFAS #115 specifically excluded Originally SFAS #115 specifically excluded NPO’s & Govt. entities.NPO’s & Govt. entities.

So 124 Requires N-G NPO’s use same So 124 Requires N-G NPO’s use same investment valuation as FP’sinvestment valuation as FP’s

SFAS 133 SFAS 133

Derivatives – Rights to ownership at later Derivatives – Rights to ownership at later dates (In the futures family)dates (In the futures family)

Example: The right to sell 100 shares of Example: The right to sell 100 shares of IBM on November 1, 2005 and a IBM on November 1, 2005 and a commitment to buy today when price is commitment to buy today when price is $40.00 per share$40.00 per share

Requires derivative agreements to be Requires derivative agreements to be recorded as assets and liabilities at FMV recorded as assets and liabilities at FMV on S of FP; Unrealized gains and losses on S of FP; Unrealized gains and losses on S of A on S of A

SFAS 136SFAS 136

How to handle transfers to NPOs that hold How to handle transfers to NPOs that hold for other organizations or individualsfor other organizations or individuals

Recorded as a liability if donor Recorded as a liability if donor organization has no control (Cannot re-organization has no control (Cannot re-direct the funds)direct the funds)

Recorded as a revenue (contribution) if Recorded as a revenue (contribution) if donor organization has control (alternative donor organization has control (alternative use)use)

NPO Accounting QuirksNPO Accounting QuirksFunds restricted as to time are recorded as Funds restricted as to time are recorded as assets in year of receipt or unconditional assets in year of receipt or unconditional pledge, whichever is earlier, and temporarily pledge, whichever is earlier, and temporarily restricted revenuerestricted revenue

Then, released from restriction in the time Then, released from restriction in the time period stated by the contributorperiod stated by the contributor

Funds restricted as to purpose (other than Funds restricted as to purpose (other than plant) are released whenever the expenditures plant) are released whenever the expenditures are made for the purposeare made for the purpose

Restricted funds are assumed to be used firstRestricted funds are assumed to be used first

Expenses are only from unrestricted assetsExpenses are only from unrestricted assets

NPO Accounting Quirks, ContinuedNPO Accounting Quirks, Continued

Property, plant, and equipment is recorded at Property, plant, and equipment is recorded at cost and depreciated similar to business cost and depreciated similar to business

Acquisition of PP & E may be handled Acquisition of PP & E may be handled From Unrestricted resourcesFrom Unrestricted resources

As unrestricted and depreciated, orAs unrestricted and depreciated, or

Temporarily restricted and reclassified according to Temporarily restricted and reclassified according to Depreciation scheduleDepreciation schedule

From Restricted resourcesFrom Restricted resourcesInitially as unrestricted, then reclassify immediately to Initially as unrestricted, then reclassify immediately to temporarily restricted, ortemporarily restricted, or

Temporarily restricted and reclassified according to Temporarily restricted and reclassified according to Depreciation scheduleDepreciation schedule

NPO Accounting Quirks, ContinuedNPO Accounting Quirks, Continued

Multi-year pledgesMulti-year pledges Recorded in year of pledge as temporarily restricted Recorded in year of pledge as temporarily restricted

at the present value of future cash flowsat the present value of future cash flows When cash is received, that amount is reclassified When cash is received, that amount is reclassified

as unrestrictedas unrestricted As time passes, the increase in PV of future As time passes, the increase in PV of future

receipts is recorded as additional contributions, not receipts is recorded as additional contributions, not interest revenueinterest revenue

Investments in equity securities with Investments in equity securities with determinable FMV recorded at FMVdeterminable FMV recorded at FMV

Voluntary Health & Welfare Voluntary Health & Welfare Organizations (VHWO’s)Organizations (VHWO’s)

YMCAYMCA

United WayUnited Way

American Heart AssociationAmerican Heart Association

(Most are non-govt; but some may receive (Most are non-govt; but some may receive some govt support)some govt support)

Accounting AuthorityAccounting AuthorityGASBGASB FASBFASB

Govt SupportedGovt Supported Non-Govt Supported (most)Non-Govt Supported (most)

VHWO’s ContinuedVHWO’s Continued

SFAS #116 ImpactSFAS #116 Impact Major-Since contributions are major source of Major-Since contributions are major source of

revenue.revenue.

SFAS #117 ImpactSFAS #117 Impact Also major-since most VHWOs prepared Also major-since most VHWOs prepared

financial statements on a disaggregated financial statements on a disaggregated (layered) basis.(layered) basis.

VHWO’s ContinuedVHWO’s Continued

Sources of Accounting AuthoritySources of Accounting Authority AICPA Audit Guide, Audits of VHWOs (1974)AICPA Audit Guide, Audits of VHWOs (1974) SFAS #116SFAS #116 SFAS #117SFAS #117 SFAS #124SFAS #124 SFAS #133SFAS #133 SFAS #136SFAS #136

Financial StatementsFinancial Statements

Statement of Financial Position (Net Assets as Statement of Financial Position (Net Assets as to restriction category)to restriction category)

Statement of ActivitiesStatement of Activities

Statement of Cash FlowsStatement of Cash Flows

Statement of Functional ExpensesStatement of Functional Expenses Program ServicesProgram Services Supporting ServicesSupporting Services

If expenses are allocable between program If expenses are allocable between program services and supporting services and are services and supporting services and are primarily for supporting, all are reported as primarily for supporting, all are reported as supporting services supporting services

VHWO Accounting Notes of VHWO Accounting Notes of ImportanceImportance

RevenueRevenue Accrual BasisAccrual Basis Revenues and public support items may be Revenues and public support items may be

recognized in any fund except custodian fundsrecognized in any fund except custodian funds Pledges (gross)Pledges (gross) Government agencies-normally restrictedGovernment agencies-normally restricted

ExpensesExpenses Program- directly related to missionProgram- directly related to mission Supporting- administration, clerical, etcSupporting- administration, clerical, etc

non-government npos

Documents