Intro Video Transcript

Non Profit Accounting Training Course By Richard Weeks, CPA Hello, My name is Richard Weeks. I am your instructor for this class: Accounting for Not for Profit Organizations. Course Overview: • This course analyzes the fundamentals of Not- for- Profit (NFP) accounting as established by Generally Accepted Accounting Principles (GAAP). • It will review four Financial Accounting Standards Board (FASB) standards which apply to Not- for- Profit organization You already know about debits and credit, so this course will focus on both the Macro and Micro levels of NFP accounting. You will learn to differentiate Not for Profit accounting from four profit accounting. We will review four financial accounting standard boards, and see how they apply to Not for Profit Organizations. Features of Not for Profits: • Receipt of voluntary contributions for support A contribution is defined as the transfer of an asset or the forgiveness of a debt. • Restrictions imposed by donors regarding use of contributions It’s important to realize why a Not for Profit is in existence versus a four profit. A four profit exists to make a profit through providing a service that is desired by other entities. A Not for Profit exists to meet a need for the community which could be defined as a small community or a large community. As you can see from the screen the receipt of voluntary contributions for support a very important aspect of not for profits and finally, restrictions are imposed upon these donations and regarding the use of these contributions. Standards Applying to Not-for-Profits  FASB No. 116 Accounting for Contributions received and made.  FASB No.117 Financial Statements of Not-for-Profit Organizations  FASB No. 124 Accounting for Certain Investments Held by Not-for-Profit Organizations The Financial Accounting Standard Board, decided in the 1990’s to standardize accounting rules because at that time the ability to analyze and compare financial statements was very difficult. A Not for Profits objective in producing financial statements is: 1. To analyze the programme is costing money over and above their budget. 2. To see if services in a given area is financially feasible. 3. And finally, to see if the organization has sufficient resources to carry out its mission. We will be studying as I have mentioned, four FASBs, that I believe will help us understand in more detail, these objective of the Not for Profit. Additional Standards set for Not-for-Profits  FASB No. 157 Fair Value Measurements  Applicable to For-Profits as well as NFPs The fourth FASB that we will be studying is the FASB number 157. In the2000’s FASB was approved. It also dealt with comparative to this for the ability to improve analysis. FASB 116 Accounting for Contributions received and made  One of the unique characteristics of a Not-for-Profit is the receipt of voluntary contributions for support. A contribution is defined is the transfer of an asset or the forgiveness of a debt. FASB 116 titled “Accounting for Contributions received and made” One of the unique features of a Not-for-Profit is the receipt for Voluntary Contributions. Contributions have posed one of the most vexing reporting problems. This is because a percentage of contributions carry restrictions on how the donations may be used. Also, when a multiyear contribution for Not-for-Profits recognize a multiyear contribution FASB 116 was created to define how these transactions should be recorded and when. The main points of FASB 116 are: 1. Accounting standards for contributions 2. It applies to all entities receiving or making contributions 3. When is Revenue recognized Another example would be; If the Not for Profit had received a loan, if a Mrs. Smith loaned an organization fifty thousand dollars to meet its payroll, this was recorded as a liability not as revenue. If in time she forgives this debt, the liability would be transformed into a contribution of fifty thousand dollars. FASB 116 Main Points The main points of FASB 116 are also when:  Conditional promises to give are recognized when conditions of the gift have been substantially met.  Requires a distinction between contributions having permanent, temporary or no restrictions. Finally  The recognition of expiration of donor- imposed restrictions and when this expiration occurs.