Accounting for Governmental and Nonprofit Entities, 18e (Reck)
1) Under current accounting and reporting standards, nongovernmental not-for-profit
organizations must utilize the fund accounting structure set forth in the AICPA Audit and
Accounting Guide Not-for-Profit Entities.
2) Examples of organizations that can be either governmental or nongovernmental include
colleges and universities, hospitals, and museums.
3) The FASB generally requires that not-for-profit organizations record unconditional pledges as
support (contributions) only when received in cash.
4) Cash received by a nongovernmental not-for-profit organization in year 1 that the donor
stipulates is to cover operating expenses of the following year should be recognized as an increase
in net assets with donor restrictions in year 1 and as net assets released from restrictions in year 2.
5) The FASB states that donated services should be recorded as contributions by a not-for-profit
organization if they meet the recognition criteria and are material.
6) The FASB requires that support from special events, if related to the central ongoing and major
activities of the organization, and related direct costs, be reported at their gross amounts in the
statement of activities.
7) GAAP for nongovernmental not-for-profit organizations is set by the FASB and the AICPA.
8) Supporting services expenses include fund-raising and management and general expenses that
are not directly attributable to specific programs.
9) Contributions received in a prior period and restricted by the donor for construction of a
building were reported as increases to net assets with donor restrictions in the period received.
When the building is constructed in a subsequent period a not-for-profit would report contributions
for the amount released from restrictions.
10) Under FASB standards the statement of activities for a not-for-profit organization is required
to be separated into operating and nonoperating activity.
11) Not-for-profits are required to report expense amounts by natural classification and functional
classification.
12)
The FASB requires not-for-profits to prepare a statement of cash flows.
13) Similarity in the characteristics of nongovernmental not-for-profit (NFP) organizations and
governmental NFP organizations can make it difficult to determine whether the NFP is
nongovernmental or governmental in nature.
14) The FASB requires not-for-profit organizations to report expenses by nature and function in
the notes to the financial statements.
15) Board-designated net assets are net assets with donor restrictions the board sets aide for a
specific purpose.
16) According to the FASB Codification, donated materials are generally not recognized as
contributions by a not-for-profit organization.
17) Donor-imposed restrictions must be clearly reflected in financial statements of not-for-profit
organizations reporting under the FASB.
18) The FASB requires that the purchase of equity securities be initially recorded at the acquisition
price and the purchase of debt securities be initially recorded at fair value.
19) Museums and religious organizations reporting in accordance with FASB must capitalize and
report assets such as works of art, historical treasures, and similar collectible items if they are held
for public inspection.
20) Under FASB standards, expenses of a not-for-profit organization can only be shown as
reductions of net assets without donor restrictions.
21) The FASB requires the statement of financial position prepared by a not-for-profit
organization to report net assets in three categories: net assets without donor restrictions, net
investment in capital assets, and net assets with donor restrictions.
22) Organizations that have the power to enact and enforce a tax levy are nongovernmental
not-for-profits.
23) The GASB provides guidance on generally accepted accounting principles for governmental
not-for-profit organizations.
24) An organization that can directly issue debt paying interest exempt from federal taxation may
be a governmental not-for-profit or a nongovernmental not-for-profit.
25) Under the FASB Codification a $5 million endowment that cannot be spent for 50 years should
be classified as net assets with donor restrictions.
26) Fixed-term endowments and board-designated endowments are classified as net assets with
donor restrictions according to the FASB.
27) Similar to the GASB, the FASB requires not-for-profit entities to prepare the statement of cash
flows using the direct method.
28) Long-term unconditional pledges (those that will not be collected within a year) are generally
reported at fair value.
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29) The FASB requires that if a financial intermediary has variance power it recognize a donation
as a contribution payable on its financial statements.
30) Under the FASB Codification the costs incurred for a joint activity may be allocated between
fund-raising expenses and program expenses if the criteria of purpose, audience, and content are
met.
31) The FASB states that if a not-for-profit has a controlling financial interest in a for-profit it
should consolidate the for-profit over which it has a controlling financial interest into its financial
statements.