Accounting for private not-for-profit organizations Accounting for Revenues, Gains and Contributions *NPOs record all events

as either -exchange transactions - contributions - agency transactions - capital acquisitions - expenses * Only contributions with donor imposed restrictions affect the restricted assets. * All other transactions, such as charges for services and government and other awards funding research or programs. -considered exchange transactions -affect unrestricted net assets *Government or private-sponsored flow-through awards to individuals or other organizations are accounted for as agency transactions, rather than as restricted activities. FASB No. 116 requires NPOs to recognize both contributions received and unconditional promises(pledges) to give as revenues or gains in the period the gift or promise is received. Contributions unconditional transfers of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary nonreciprocal transfer -non exchange transactions which may include cash, securities, land and buildings -may also include noncash items or gifts in kind such as free or discounted use of facilities or utilities, donated materials and supplies, intangible assets, and services of unpaid workers. -ALL of these items are recorded at the FAIR VALUE at the DATE of the gift -in the case of noncash gifts, a corresponding asset or expense is recorded. Exceptions to the general recognition provision are made for contributions of services and works of art. Donated services, typically relied on to supplement the efforts of paid employees, are recognized only if they (a) create or enhance nonfinancial assets or (b) require

specialized skills, are provided by individuals possessing those abilities, and typically would have to be purchased if not provided by donation. NPOs need not recognize contributed works of art, historical treasures, and similar assets as contributions if the donated items are added to collections that are (a) held for public exhibition, education, or research rather than financial gain, (b) protected and preserved, or (c) subject to an organization policy that requires the proceeds from sales of collection items to be used to acquire other items for collections. -Although organizations can choose whether or not to capitalize their collections, the choice must be applied to all collections. -capitalizations may be done retroactively or prospectively. Pledges (promises to give) are divided into unconditional pledges and conditional pledges. Unconditional pledges depend only on the passage of time or the demand by the not-for-profit to be collected and are recognized as a receivable and revenue or support in the year made. Conditional pledges depend on the occurrence of uncertain future events and should be recognized as revenue when the conditions are substantially met (i.e. the pledge becomes unconditional) Pledges or other assets received subject to conditions are recorded as refundable advances until the conditions have been substantially met, at which time revenue is recorded.