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Chapter 21 Q and A

Chapter 21 Q and A - Chapter 21 ACCOUNTING FOR...

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Chapter 21 ACCOUNTING FOR NOT-FOR_PROFIT ORGANIZATIONS Questions 1 The financial statements required for nongovernmental 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. Organizations recognize conditional promises to give as contribution revenue and receivables when the conditions are substantially met (in other words, when the conditional promise to give becomes unconditional); however, they account for a conditional gift of cash or other asset that may have to be returned to the donor if the condition is not met as a refundable advance (liability). Organizations recognize unconditional promises to give as restricted or unrestricted contribution revenue and receivables in the period in which the promise is received. 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
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