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Unformatted text preview: CHAPTER 19 Note: The letter A, B, or C indicated for a question, exercise, or problem means that the question, exercise, or problem relates to a chapter appendix. ANSWERS TO QUESTIONS 1. In 1979, the FASB took the responsibility for establishing financial accounting and reporting standards for NNOs. Support for existing accounting and reporting practices is also contained in Audit Guides and Statements of Position published by the AICPA. 2. NNOs use fund accounting because in many cases their resources are restricted by law, contract, donors, other external authorities, or the organization's governing board. Fund accounting facilitates compliance with such restrictions. 3. NNOs need to distinguish between restricted and unrestricted funds in order to separate resources that may be used at the discretion of the governing board and those which have restrictions. Resources not found in the unrestricted funds have contractual, external, legal, or discretionary restrictions. 4. Unlike other NNOs, hospitals combine their revenues from unrestricted resources and restricted resources in the General Fund accounts and financial statements. In addition, hospitals account for property and equipment, accumulated depreciation and depreciation expense, and long-term obligations associated with the acquisition of property and equipment in the General Fund whereas other NNOS account for these assets and liabilities in Plant Funds. 5. Unconditional pledges are recorded as revenues while conditional pledges are not recorded until they become unconditional. An example of unconditional pledges is when a donor makes a nonrevocable offer to give one million dollars to a hospital. An example of conditional pledges is when a donor offers to contribute one million dollars if the hospital receives less than ten million dollars from government funding in the next fiscal year. 6. Nonmandatory transfers are transfers by Colleges and Universities of Board Designated Funds from the resources of the Unrestricted Current Fund to Quasi-Endowment, Loan, Plant or other funds maintained by the College or University. 7. Yes, board designated funds should be accounted for in the Unrestricted Current Fund (General Fund of a hospital). The procedure for formal recognition of such designations in the Unrestricted Current Fund by NNO's other than hospitals is similar to an appropriation of retained earnings. Hospitals classify resources that have been designated by the board for a specific use in a separate section of the Statement of Financial Position of the General Fund entitled Assets Whose Use is Limited. 19- 1 8. Prior to the effective date of SFAS No. 116, donated services were recorded under different circumstances for each of the NNOs....
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This note was uploaded on 01/06/2012 for the course ACCT 501 taught by Professor Jerris during the Fall '11 term at S.F. State.
- Fall '11