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Financial Accounting and Reporting/Blueprint/1.B

General-purpose financial reporting: nongovernmental not-for-profit entities

Area 1: Financial Reporting (30-40%)

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Topics

  • Statement of financial position
  • Statement of activities
  • Statement of cash flows
  • Notes to the financial statements

Lessons

  • Financial Reporting: Not-for-Profit EntitiesFree

Study Frameworks

Financial Statements Overview

Financial Statements
Balance Sheet
Current & non-current assets
Current & long-term liabilities
Stockholders' equity
Income Statement
Revenue
Cost of goods sold
Operating expenses
Other income/expenses
Income tax expense
Statement of Cash Flows
Operating activities
Investing activities
Financing activities
Statement of Stockholders' Equity
Common/preferred stock
APIC
Retained earnings
Treasury stock
AOCI

NFP Financial Statements vs. For-Profit

NFP Financial Reporting (ASC 958)
Statement of Financial Position
Net assets with donor restrictions
Net assets without donor restrictions
No stockholders' equity section
Statement of Activities
Change in net assets (replaces net income)
Revenues, gains, expenses, losses by net asset class
Reclassifications when restrictions are met
Statement of Functional Expenses
Required for voluntary health and welfare orgs
Optional for other NFPs (can disclose in notes)
Expenses by nature (salaries, rent) AND function (program, admin, fundraising)
Statement of Cash Flows
Same three categories as for-profit
Donor-restricted cash for long-term purposes → financing activity

NFP Contribution: With or Without Donor Restrictions?

Does the donor impose a restriction on how or when the contribution can be used?
Yes
Is the restriction perpetual (principal must be maintained indefinitely)?
Yes
Net assets with donor restrictions (endowment) — only investment return is available for spending per donor stipulation
No
Is the restriction a purpose restriction (must be used for a specified activity)?
Yes
Net assets with donor restrictions (purpose) — reclassify to without restrictions when the purpose is fulfilled
No
Net assets with donor restrictions (time) — reclassify to without restrictions when the time period expires
No
Net assets without donor restrictions — available for general use immediately

NFP vs. For-Profit Financial Statements

For-Profit StatementNFP EquivalentKey Difference
Balance SheetStatement of Financial PositionNet assets classified by donor restrictions (with/without) instead of stockholders' equity
Income StatementStatement of ActivitiesReports change in net assets by class instead of net income. Includes reclassifications when restrictions are met
(No equivalent)Statement of Functional ExpensesRequired for voluntary health and welfare orgs. Expenses by nature AND function (program, management, fundraising)
Statement of Cash FlowsStatement of Cash FlowsSame three categories. Donor-restricted contributions for long-term purposes classified as financing activities
Statement of Stockholders' Equity(No equivalent)NFPs have no equity owners — net asset classes replace equity categories

OCI Components

ComponentReclassified to Income?When Reclassified
Unrealized gains/losses — AFS debt securitiesYesWhen sold or impaired
Foreign currency translation adjustmentsYesWhen foreign entity disposed
Pension/OPEB adjustmentsYesAmortized into pension expense
Cash flow hedge gains/lossesYesWhen hedged item affects earnings
Credit risk changes (FV option liabilities)NoNever reclassified
PUFERPensions/OPEB, Unrealized gains on AFS debt, Foreign currency translation, Effective portion of cash flow hedges, Risk (credit) changes on FV option liabilities

The five components of Other Comprehensive Income (OCI). PUFER items bypass net income and accumulate in AOCI on the balance sheet.

Practice These Topics(58 questions)