Module 10 – Chapter 12

NFPOs:

 Provides goods or services without the expectation of profit

 Resources are provided by government or people without expectations for returns
 No identifiable ownership or interests that can be sold, transferred, or redeemed

Two Sectors of NFP

Public NFP Sector: Ex. Hospitals controlled by government

Private NFP Sector: NFPOs not controlled by government

NFPO Revenues:

1. Contributions (cash of any kind)

a. Restricted
b. Endowment
c. Unrestricted
2. Other Types (Investment, the sale of goods and services)
a.

Contribution Revenue: Non-Reciprocal

Collections – choices

 Expense when acquired

 Capitalized but not amortize
 Capitalize and amortize

Fund Accounting:

Segregates accounting
Accounting for Contributions

 Two Methods: Deferral Method and Restricted Fund Method

 Deferral method can be used with or without fund accounting
 Restricted fund method must be used with fund accounting
 Overall Picture = deferral method
 Report on fund accounting basis = deferral method for all funds or the restricted fund method

The Restricted Fund Method

 Must be used with fund accounting

 Requirements: Report General Fund, at least one restricted fund, and endowment fund if exists
 Restricted funds used to record external restricted revenues, or restricted income from
endowment funds investments
 Endowment funds must only show contribution revenue and no expenses
 Endowment fund income permanently restricted, recorded as revenue on endowment fun
 General Fund: all unrestricted contributions and investment income (income from endowment).
Using deferral method, general funds also report restricted contributions and investment
income for which no separate restricted funds exist
 Contributions are revenue
 Restricted funds or endowments are receivable
 Unamortized capital assets less associated debt, regardless or restricted or restricted
 Statement of changes in fund
 Donations fall into general fund

The Deferral Method:

 Fund accounting is optional

 Matches contribution revenues with related expenses
 Unrestricted contributions are revenue in period received
 Endowment contributions not shown on operating statement, on statement of changes in net
assets
 Restricted contributions are matched against related expenses
 Restricted contributions for future expenses are deferred and recognized in revenue in the same
period as related expenses
 Contributions for depreciable assets are recognized as revenue as the asset is being amortized
 Unamortized portion of capital asset less associated debt s only for unrestricted resources
 Endowments are in statement of changes in net assets
 Contribution revenue when expensed

Donated Capital Assets, Materials, and Services

 NFPO has option to report donated material and services, only if FV can be determined