Beams9eSM_ch21 - Chapter 21 VOLUNTARY HEALTH AND WELFARE...

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Chapter 21 VOLUNTARY HEALTH AND WELFARE ORGANIZATIONS, HEALTH CARE ENTITIES, AND COLLEGES AND UNIVERSITIES Answers to Questions 1 The financial statements required for nongovernment not-for-profit entities include a statement of financial position, a statement of activities, and a cash flow statement. Voluntary health and welfare organizations also provide a statement of functional expenses. 2 Each hospital, college, and voluntary health and welfare organization (and other not-for-profit organizations as well) must be evaluated to determine whether it meets the definition of a government in the authoritative literature. Those that meet the definition of a government must apply the government GAAP hierarchy. GASB standards are the most authoritative guidance for these entities. All other entities are to apply FASB standards. 3 A conditional promise to give depends on the occurrence of a specified future and uncertain event to bind the promisor. An unconditional promise to give depends only on the passage of time or demand by the promisee for performance. 4 A donor-imposed condition provides that the donor will have his resources returned (or will be released from the promise to give) if the condition is not met. A donor-imposed restriction only limits the purpose or timing of use of the contributed assets. 5 Unconditional promises to give with payments due in the next period are reported as restricted support (net of an appropriate allowance for uncollectible accounts) that increase temporarily restricted net assets, even if the resources are not restricted for specific purposes. 6 When a time restriction is met, temporarily restricted net assets are reclassified as unrestricted net assets. The entry includes a debit to temporarily restricted net assets—reclassifications out and a credit to unrestricted net assets—reclassifications in. (Different account titles, such as amounts released from restrictions, are permitted as well.) 7 Gifts in kind are reported as unrestricted support that increases unrestricted net assets if the not-for-profit entity has discretion over the disposition of the resources and a fair value can be reasonably determined. If fair value cannot be determined, the items are recorded as sales revenue when they are sold. If the not- for-profit entity has little or no discretion over disposition of the items, the gifts in kind should be accounted for as agency transactions. 8 Program services of voluntary health and welfare organizations are expenses incurred in meeting the social service objectives of the organization. Examples are research, public education, community services, and patient services. Supporting services consist of the organization’s administrative and fund- raising costs, and expenses for these items are so classified in the statement of activities. 9
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This note was uploaded on 01/29/2009 for the course BA 459 taught by Professor Slattery during the Spring '09 term at Southern Oregon.

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Beams9eSM_ch21 - Chapter 21 VOLUNTARY HEALTH AND WELFARE...

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