PORTFOLIO

Accounting for Not-for-Profit Organizations (Portfolio 5200)

BNA Portfolio 5200-2nd, Accounting for Not-for-Profit Organizations (Accounting Policy and Practice Series), analyzes the accounting and reporting requirements for most nongovernmental not-for-profit organizations. More specifically, this Portfolio comprehensively surveys generally accepted accounting principles (GAAP) as they relate and apply to not-for-profit organizations.

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DESCRIPTION

BNA Portfolio 5200-2nd, Accounting for Not-for-Profit Organizations (Accounting Policy and Practice Series), analyzes the accounting and reporting requirements for most nongovernmental not-for-profit organizations. More specifically, this Portfolio comprehensively surveys generally accepted accounting principles (GAAP) as they relate and apply to not-for-profit organizations.
Accounting and disclosure requirements for not-for-profit organizations differ significantly from those of for-profit organizations. Not-for-profit organizations do not utilize equity ownership interests, receive a significant portion of their revenues from donors, and have different motives for existence than their for-profit counterparts.
This Portfolio discusses in depth a number of accounting and disclosure issues unique to not-for-profit organizations including revenues and receivables from contributions, agency transactions, and split-interest agreements. In addition, this Portfolio discusses the accounting and disclosure issues related to collections of art, historical treasures, and other similar assets.
Finally, this Portfolio describes the basic financial statements for not-for-profit organizations, including: the statement of financial position, statement of activities, and statement of cash flows. The disclosure requirements for each of these statements and other footnote disclosures are also discussed herein.
This Portfolio may be cited as BNA Tax and Accounting Portfolio 5200-2nd, Daher, Daher, Larkin and Roque, Accounting for Not-for-Profit Organizations (Accounting Policy and Practice Series).
Note: Various FASB documents, copyright by the Financial Accounting Standards Board, 401 Merritt 7, P.O. Box 5116, Norwalk, CT 06856-5116, U.S.A., are reprinted with permission.


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AUTHORS

DOMINIC L. DAHER, MACC, JD, LLM IN TAXATION
Dominic L. Daher is the Director of Internal Audit and Tax Compliance at the University of San Francisco. He is a graduate of New York University School of Law (LL.M. Taxation); Washington University School of Law (J.D.); and the University of Missouri-Columbia (Master and Bachelor of Accountancy). Mr. Daher writes for various scholarly and professional journals and serves on editorial advisory boards for numerous professional publications. He also is an adjunct member of the faculty at the University of San Francisco in its School of Business and Management, where he teaches accounting courses and in May 2005 garnered the Outstanding Faculty Teaching Award.

STACY E. DAHER, MACC, CPA
Stacy E. Daher is the Assistant Treasurer at the University of San Francisco. In this role she is responsible for the management of the University's endowment investments, cash management, and debt issuance. Ms. Daher was formerly a Senior Associate with PricewaterhouseCoopers. Ms. Daher is a graduate of Saint Louis University (Master of Accountancy) and the University of Missouri-Columbia (Bachelor of Music). Ms. Daher is also an adjunct member of the faculty at the University of San Francisco School of Business and Management.

RICHARD F. LARKIN, CPA, MBA
Richard F. Larkin is Technical Director for Not-for-Profit accounting and auditing for the Institute for Nonprofit Excellence at BDO USA, LLP. Previously he was Technical Director in the Not-for-Profit Industry Services Group in the national office of PricewaterhouseCoopers LLP. He is a CPA with over 40 years of experience, serving not-for-profit organizations as an accountant, board member, treasurer, and consultant. Professional memberships have included the FASB Not-for-Profit Advisory Task Force, the AICPA Not-for-Profit Organizations Committee (three terms), the Evangelical Joint Accounting Committee, and the AICPA Not-for-Profit Audit Guide Task Force (chair). He is a co-author of the 4th, 5th, and 6th editions of Financial and Accounting Guide for Not-for-Profit Organizations, author of the 1st edition of Financial Statement Presentation and Disclosure Practices for Not-for-Profit Organizations (published by the AICPA), as well as numerous articles. He is an adjunct professor of not-for-profit management at Georgetown University.

R. ERICA ROQUE, CPA, ESQUIRE
R. Erica Roque, J.D., George Mason University School of Law; B.S. in Accountancy, The George Washington University. As an attorney and Certified Public Accountant, Ms. Roque is a well-rounded business professional with over 10 years of taxation, operational, financial, and auditing experience. She has practiced law with Buchanan, Ingersoll & Rooney PC and Xerox Corporation and is currently practicing in public accounting with Halt, Buzas & Powell, Ltd.

TABLE OF CONTENTS

Detailed Analysis

I. Introduction

Introductory Material

A. Scope of Portfolio

B. Authoritative Accounting Literature

II. Basic Financial Statements

A. Introduction

B. Statement of Financial Position

1. Introduction

2. Form and Content

a. Reporting Classifications

b. Information About Liquidity

c. Net Asset Classes

3. Financial Statement Presentation

C. Statement of Activities

1. Introduction

2. Form and Content

a. Reporting Classifications

b. Functional Reporting of Expenses

3. Financial Statement Presentation

D. Statement of Cash Flows

1. Introduction

2. Form and Content

a. Operating Activities

b. Investing Activities

c. Financing Activities

d. Direct Versus Indirect Method of Reporting Cash Flows From Operating Activities

(1) Direct Method

(2) Indirect Method

e. Disclosure of Non-Cash Investing and Financing Activities

3. Financial Statement Presentation

E. Comparative Financial Information

III. Cash and Cash Equivalents

A. Introduction

B. Definitions

C. Financial Statement Presentation and Disclosure

1. Statement of Financial Position

2. Footnote Disclosure

IV. Investments in Debt Securities and Equities With Readily Determinable Fair Values

A. Introduction

B. Donor-Restricted Endowment Funds

C. Investment Pools

D. Investments in Marketable Securities

1. Introduction

2. Definitions

a. Debt Securities

b. Equity Securities

3. Valuation

a. Valuation at Acquisition

b. Valuation Subsequent to Acquisition

4. Investment Income

5. Unrealized and Realized Gains and Losses

a. Unrealized Gains and Losses

b. Realized Gains and Losses

E. Footnote Disclosures

V. Revenues and Receivables from Exchange Transactions

A. Introduction

B. Definition of Exchange Transactions

C. Recognition and Measurement

1. Distinguishing Between Exchange Transactions and Contributions

2. Memberships and Dues

3. Grants, Awards, and Sponsorships

4. Distinguishing Between Revenues and Gains

D. Allowance for Uncollectible Accounts

E. Financial Statement Presentation and Disclosure

F. Loans and Notes Receivable

VI. Revenues and Receivables From Contributions

A. Introduction

B. Definition

C. Recognition and Measurement Principles

1. Measurement Principles

2. Agency Transactions

a. Transfers of Assets That Are Contributions

b. Transfers of Assets That Are Revocable, Repayable, or Reciprocal

c. Required Disclosures for Reciprocal Transactions

3. Donor-Imposed Conditions and Restrictions

a. Donor-Imposed Conditions

b. Donor-Imposed Restrictions

(1) Permanently Restricted Contributions

(2) Temporarily Restricted Contributions

(3) Unrestricted Contributions

c. Footnote Disclosure

4. Unconditional and Conditional Promises to Give

a. Unconditional Promises to Give

(1) Recognition

(2) Initial Measurement

(3) Subsequent Measurement

b. Intentions to Give

c. Conditional Promises to Give

d. Disclosures

(1) Statement of Financial Position

(2) Footnote Disclosure

5. Gifts in Kind

a. Recognition and Measurement

b. Gifts in Kind Associated With Fundraising Events

c. Disclosure

6. Contributed Services

a. Recognition and Measurement

b. Disclosures

7. Contributed Utilities

8. Contributed Use of Long-Lived Assets

a. Recognition and Measurement

b. Disclosure

9. Contributed Collection Items

D. Other Financial Statement Presentation and Disclosures

1. Statement of Activities

2. Footnote Disclosure

VII. Split-Interest Agreements

A. Introduction

B. Types of Split-Interest Agreements

1. Revocable Versus Irrevocable Split-Interest Agreements

a. Revocable Split-Interest Agreements

b. Irrevocable Split-Interest Agreements

2. Charitable Lead Trusts

a. Definition

b. Recognition and Measurement

(1) Not-for-Profit Organization Is Trustee

(2) Not-for-Profit Organization Is Not Trustee

3. Perpetual Trusts Held by Third Parties

a. Definition

b. Recognition and Measurement

4. Charitable Remainder Trusts

a. Definition

b. Recognition and Measurement

(1) Not-for-Profit Organization Is Trustee

(2) Not-for-Profit Organization Is Not Trustee

5. Charitable Gift Annuities

a. Definition

b. Recognition and Measurement

6. Pooled (Life) Income Funds

a. Definition

b. Recognition and Measurement

C. Disclosure of Split-Interest Agreements

1. Financial Statement Disclosure

a. Statement of Financial Position

b. Statement of Activities

2. Footnote Disclosure

VIII. Other Assets

A. Introduction

B. Inventory and Supplies

1. Definition

2. Recognition and Measurement of Contributed Inventory

C. Prepaid Expenses, Deferred Charges, and Intangible Assets

1. Definition

2. Recognition and Measurement

D. Collections

1. Definition

2. Recognition and Measurement

3. Financial Statement Disclosure

a. Collection Items That Are Not Capitalized

b. Collection Items That Are Capitalized Prospectively

c. Collection Items That Are Capitalized Retroactively

d. Organizations That Capitalized Collections Prior to FASB Statement No. 116

IX. Property and Equipment

A. Introduction

B. Definition

C. Recognition and Measurement Principles

1. Contributions of Property and Equipment

a. Recognition and Measurement

b. Disclosure

2. Capitalized Interest

a. Recognition

b. Measurement

c. Disclosure

D. Depreciation Expense

1. Recognition and Measurement

2. Disclosure

E. Impairment or Disposal of Long-Lived Assets

1. Impairment of Long-Lived Assets to Be Held and Used

a. Recognition and Measurement

b. Reporting and Disclosure

2. Disposal of Long-Lived Assets

a. Long-Lived Assets to Be Disposed of Other Than by Sale

b. Long-Lived Assets to Be Disposed of by Sale

(1) Recognition

(2) Measurement

(3) Disclosure

F. Asset Retirement Obligations

1. Definition

2. Measurement

3. Disclosure

G. Other Financial Statement Presentation and Disclosure Requirements

X. Accounts Payable, Accruals and Other Liabilities

A. Introduction

B. Accounts Payable and Accruals

C. Deferred Revenue

D. Refunds Due, Advances and Deposits

E. Unconditional Promises to Give

1. Recognition and Measurement

2. Financial Statement Disclosures

F. Guarantees of the Indebtedness of Others

1. Recognition and Measurement

2. Financial Statement Disclosures

G. Accounting for Contingencies

H. Tax-Exempt Financing

XI. Net Assets

A. Introduction

B. Net Asset Classifications

1. Unrestricted Net Assets

2. Temporarily Restricted Net Assets

3. Permanently Restricted Net Assets

C. Reclassifications and Releases From Restriction

D. Financial Statement Presentation and Disclosure

XII. Expenses, Gains and Losses

A. Introduction

B. Expenses

1. Definition

2. Recognition

3. Reporting Requirements

4. Functional Reporting

a. Program Services

b. Supporting Activities

c. Allocation of Expenses Among More Than One Function

5. Joint Activities

a. Description

b. Accounting for Joint Activities

(1) Purpose Criterion

(2) Audience Criterion

(3) Content Criterion

c. Illustrative Examples

d. Disclosures of Joint Costs

(1) Disclosure Requirements

(2) Illustrative Disclosure

C. Gains and Losses

1. Definitions

2. Reporting Requirements

Working Papers


WORKING PAPERS

TABLE OF WORKSHEETS

Worksheet 1 Illustrative Statement of Financial Position

Worksheet 2 Illustrative Statement of Activities

Worksheet 3 Illustrative Statement of Cash Flows

Worksheet 4 Transactions Reported in the Illustrative Financial Statements

Worksheet 5 List of Significant Accounting Pronouncements Principally Discussed

Bibliography

OFFICIAL

Financial Accounting Pronouncements:

Financial Accounting Standards Board (FASB)

FASB Statements of Financial Accounting Standards

FASB Interpretations

FASB Concept Statements

FASB Staff Positions

American Institute of Certified Public Accountants (AICPA)

Accounting Principles Board Opinions

AICPA Statements of Positions

AICPA Audit and Accounting Guides