FAR 6: NFP Accounting and Government
Accounting Questions with Complete
Solutions
Required F.S. for NFP Reporting 1. Statement of Financial Position (B/S)
2. Statements of Activities (I/S or changes of equity)
3. Statement of Cash Flows (SOCFs using direct or indirect method).
NFP: Reporting Expenses by Nature and Function All NFPs must report information
about the relationship between function and natural classifications of expenses in one locations.
Ways to report:
(1) On face of Statement of Activities.
(2) As a schedule in FNs on Statements
(3) In separate F.S.
,NFP Expenses: Functional Classifications Functional: Categorizes costs by major classes
of program and support services.
- Program services: elate to the purpose or mission of the organization.
- Support services: Relate to activities such as management and general, fundraising, and
membership development.
NFP Expenses: Natural Classifications Include descriptions such as:
- Salaries
-Rent
-Interest expense
- Supplies
Similar to general ledger titles for expenses.
NFP Net Assets: The components of net assets may include one or both of the following:
1. With donor restrictions
,2. Without donor restrictions
*If an asset or liability has a restriction, classify as non-current on Statement of Position.*
Net Assets Without Donor Restrictions Available to finance general operations of a NFP
organization and may be expended at the discretion of the BOD.
Internal board-designated funds are classified as net assets w/o restrictions, may include:
- Board-designated endowment funds
- Board-designated net assets (for future obligations)
Net Assets With Donor Restrictions 1. Externally imposed limitations made by donor.
2. Information regarding limitation (nature and amount) should be either reported within the F.S.
under NAWDR or in the noted of F.S.
Examples:
- Support for particular activity.
- Investment for specified term.
- Use in specified period.
, - Acquisition of long-lived assets.
- Donor restricted endowments that are perpetual in nature (permanent source of income).
Disclosures for Statement of Financial Position: Qualitative Disclosures: Used to assess
liquidity, including how the organization manages its liquid resources to meet cash needs in
general expenditures.
Quantitative Disclosure: Displays/disclouses the availability of liquid resources affected by:
- Nature of resources
- External limits on resources
- Internal limits imposed by internal governing boards (BOD).
Disclosure Examples: Slides 23-27
Required Elements pf the Statement of Activities: 1. Change in TOTAL net assets
2. Without donor restrictions.
3. With donor restrictions.
Accounting Questions with Complete
Solutions
Required F.S. for NFP Reporting 1. Statement of Financial Position (B/S)
2. Statements of Activities (I/S or changes of equity)
3. Statement of Cash Flows (SOCFs using direct or indirect method).
NFP: Reporting Expenses by Nature and Function All NFPs must report information
about the relationship between function and natural classifications of expenses in one locations.
Ways to report:
(1) On face of Statement of Activities.
(2) As a schedule in FNs on Statements
(3) In separate F.S.
,NFP Expenses: Functional Classifications Functional: Categorizes costs by major classes
of program and support services.
- Program services: elate to the purpose or mission of the organization.
- Support services: Relate to activities such as management and general, fundraising, and
membership development.
NFP Expenses: Natural Classifications Include descriptions such as:
- Salaries
-Rent
-Interest expense
- Supplies
Similar to general ledger titles for expenses.
NFP Net Assets: The components of net assets may include one or both of the following:
1. With donor restrictions
,2. Without donor restrictions
*If an asset or liability has a restriction, classify as non-current on Statement of Position.*
Net Assets Without Donor Restrictions Available to finance general operations of a NFP
organization and may be expended at the discretion of the BOD.
Internal board-designated funds are classified as net assets w/o restrictions, may include:
- Board-designated endowment funds
- Board-designated net assets (for future obligations)
Net Assets With Donor Restrictions 1. Externally imposed limitations made by donor.
2. Information regarding limitation (nature and amount) should be either reported within the F.S.
under NAWDR or in the noted of F.S.
Examples:
- Support for particular activity.
- Investment for specified term.
- Use in specified period.
, - Acquisition of long-lived assets.
- Donor restricted endowments that are perpetual in nature (permanent source of income).
Disclosures for Statement of Financial Position: Qualitative Disclosures: Used to assess
liquidity, including how the organization manages its liquid resources to meet cash needs in
general expenditures.
Quantitative Disclosure: Displays/disclouses the availability of liquid resources affected by:
- Nature of resources
- External limits on resources
- Internal limits imposed by internal governing boards (BOD).
Disclosure Examples: Slides 23-27
Required Elements pf the Statement of Activities: 1. Change in TOTAL net assets
2. Without donor restrictions.
3. With donor restrictions.
