Executive Summary
Not-For-Profit organisations are basically different than for-profit. private sector concerns in that they do non hold stockholders. their mission statements are focused on fostering a cause instead than merely increasing profitableness and most Not-For-Profits earn the bulk of their gross through donor parts. As a consequence. Not-For-Profit Organizations operate under different coverage demands than for-profit concerns. In order to supply proper accounting for the legion activities undertaken by a Not-For-Profit Organization in a given twelvemonth. it is imperative that one understand the two fiscal accounting criterions that affect Not-For-Profit organisations the most: Statements of Financial Accounting Standards ( SFAS ) 116 and 117 which provide counsel on donor parts and the presentation of the fiscal statements.
The aim of this sum-up is to supply a high-ranking overview of the criterions and the consequence they have on the fiscal statements of a Not-For-Profit organisation. The Statement of Financial Accounting Standards No. 116 establishes the criterions for accounting for parts received and parts made to all organisations with financial old ages get downing after December 15. 1994. Contributions are defined by SFAS No. 116 as voluntary transportations in which the giver does non have any value in return. Donor parts may include the undermentioned resources:
Cash.
Marketable securities
Property and equipment
Utilities and Supplies
Intangible assets such as rational belongings
Professional services
SFAS 116 requires that all parts and unconditioned promises to donate in the hereafter. known as pledges. are recognized as grosss at just value in the period in which they are received. Pledges are recognized every bit shortly as the demands of a pledge are met and it is no longer contingent on a future event. Additionally. parts made and received are besides recognized at as disbursals upon reception at just value.
The Statement of Financial Accounting Standards No. 116 besides requires organisations to place those parts that contain donor-imposed limitations and the timeframe or demands for run intoing these donor-imposed limitations. Harmonizing to SFAS No. 116. organisations must sort parts into one of the following classs based on the being or absence of giver imposed judicial admissions:
Permanently Restricted Net Assetss
Temporarily Restricted Net Assetss
Unrestricted Net Assetss
Those assets that are restricted by a giver imposed judicial admission of clip. a peculiar intent or plan. or the happening of a future event must be set aside and can non be expended until the limitation has expired through the satisfaction of the donor judicial admission.
Statement of Financial Accounting Standards ( SFAS ) No. 117 is besides of import in accounting for Not-For-Profit Organizations in that it provides criterions for the presentation of the fiscal statements for organisations with financial old ages get downing after December 15. 1994. Overall. this standard requires that the fiscal statements provide the necessary information for all of the users of Not-For-Profit fiscal statements. The standard requires that Not-For-Profit Organizations produce the undermentioned fiscal statements on an one-year footing: A statement of fiscal place ( balance sheet )
A statement of activities ( income statement )
A statement of hard currency flows
In the statement of fiscal place. SFAS No. 117 requires that the Not-For-Profit organisation provide sums for the entire assets. liabilities. and net assets at the terminal of the financial period. Additionally. the statement of fiscal place must sort the organisations net assets as temporarily restricted. for good restricted. or unrestricted based on giver imposed judicial admissions.
The statement of activities is required to describe to the fiscal statement users the minutess which caused a alteration in net assets during the period and the statement of hard currency flows is must supply a rapprochement of activity between get downing and stoping hard currency balances of the period as either operating activities. funding activities or puting activities. Extra agendas are besides required by SFAS No. 117 for particular organzations such a voluntary wellness and health organisations that provide alone services related to their cause.
Overall. a thorough apprehension and application of Statements of Financial Standards No. 116 and 117 allows Not-For-Profit organisations to decently account for their alone activities and supply their fiscal statement users with relevant. apprehensible and comparable information in order to measure the fiscal place of the Not-For-Profit organisation over the past financial twelvemonth and traveling frontward into the hereafter.
