Quiz 16: Non-Slg Not-For-Profit Organizations

Business

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img Note that the FASB considers the restrictions met if restricted resources could have been used for the expenses-even if they were not used.

A. Unrestricted contributions received in cash are reported as revenues in the changes in net assets without donor restrictions section of the statement of activities in the period received. If the unrestricted contributions are pledges that are not received by year end, a time restriction is implied unless the donor specifies that the resources are contributed to support the current period. Because of the implied time restrictions, the pledges would be reported as contribution revenues (at their present value or at their net realizable value) in the changes in net assets with donor restrictions section. When collected, net assets released from restrictions is reported as an increase in the changes in net assets without donor restrictions and as a decrease in the changes in net assets with donor restrictions section. B. Pledges restricted to a specific program are reported as contribution revenues in the changes in net assets with donor restrictions section of the statement of activities, either at present value or at net realizable value. When the pledge has been received and expenses incurred for the restricted purpose, net assets released from restrictions is reported as an increase in the changes in net assets without donor restrictions and as a decrease in the changes in net assets with donor restrictions. C. This collection is not reflected in the statement of activities. There are two restrictions in this case when the pledges are made-a time restriction (implied) and a use restriction. Collection removes the time restriction, but the use restriction remains. Hence, the assets are not yet released from restrictions. D. Pledges restricted to fixed asset construction are reported as contributions in the changes in net assets with donor restrictions section of the statement of activities, either at present value or at net realizable value. When construction costs are incurred for the restricted purpose and the asset has been placed in use, an organization must adopt one of two polices. Under the first approach, when the asset is placed in service, net assets released from restrictions is reported as an increase in the changes in net assets without donor restrictions and as a decrease in the changes in net assets with donor restrictions. Under the second approach, when construction costs are incurred, there is no change in net assets. As the assets are used up (depreciated), depreciation expense is reported in net assets without donor restrictions and net assets released from restrictions is reported as an increase in the changes in net assets without donor restrictions and as a decrease in the changes in net assets with donor restrictions. The depreciation expense and the net assets released from restrictions are not necessarily equal in amount. For instance, while they may be recognized over the same period, residual value would not be taken into account in computing the net assets released from restrictions-even if the same time period is appropriate. E. Earnings on restricted investments are considered unrestricted unless the donor specifically restricted their use. Therefore, these earnings are reported as investment income in the changes in net assets without donor restrictions.