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CHAPTER 16 NON-SLG NOT-FOR-PROFIT ORGANIZATIONS: SFAS 116 AND 117 APPROACH ANSWERS TO QUESTIONS Question 16-1 Voluntary health and welfare organizations provide various kinds of health, welfare, and community services. They are financed primarily by voluntary contributions from the public. VHWOs are organized for the public benefit and are supported largely by public contributions. The providers of resources are not the primary recipients of services or benefits of a VHWO. VHWOs include the Boy Scouts and Girl Scouts, the American Cancer Society, the YMCA and the YWCA, halfway houses for drug offenders, and so on. Other not-for-profit organizations, in one sense, is the "all other not-for-profit organizations” category. It includes a wide variety of not-for-profit organizations that do not meet the definition of VHWOs, colleges and universities, or health care organizations. ONPOs range from churches and other religious organizations to fraternal organizations to political parties and professional associations. Question 16-2 Different accounting standards must be applied by VHWOs and by ONPOs that are government organizations than are to be applied by VHWOs and by ONPOs that are not government organizations. This situation exists because while the GASB has primary standards setting authority over government VHWOs and government ONPOs, the FASB has primary standards setting authority over all other VHWOs and ONPOs. Accounting and reporting for the government and nongovernment entities were very similar until the FASB adopted SFAS Nos. 116 and 117 . These standards changed financial reporting for nongovernment, not-for-profit organizations significantly, but do not affect accounting and financial reporting for government not-for-profit organizations. Government VHWOs and ONPOs are required to apply the state and local government accounting model discussed in the previous chapters. They are prohibited from applying the FASB standards for not-for-profit organizations. Question 16-3 The basic financial statements required for nongovernment ONPOs are: • Statement of Financial Position (Balance Sheet) • Statement of Activity • Statement of Cash Flows ©2009 Pearson Education, Inc. publishing as Prentice Hall 87
Question 16-4 SFAS No. 117 requires nongovernment, not-for-profit organizations to report net assets (assets less liabilities) in three classes: 1. Unrestricted net assets —The portion of net assets not temporarily or permanently restricted. (This category may include assets that previously were temporarily restricted, but for which the donor stipulation has been met, removing the restriction.) 2. Temporarily restricted net assets —The portion of net assets whose use is limited by donor-imposed restrictions on the timing of use (e.g., pledges for future period giving and term endowments) or purpose of use of the donated resources. 3.
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