Governmental & Not-for-Profit Accounting Flashcards

Under FASB ASC 958, not-for-profit organizations classify net assets into which two categories?

Answer: Net assets with donor restrictions and net assets without donor restrictions

ASU 2016-14 simplified the previous three-class model to two classes: net assets with donor restrictions and net assets without donor restrictions.

The Statement of Activities for a not-for-profit organization reports revenues and expenses:

Answer: Separated by each program and supporting service with functional expense allocation

The not-for-profit Statement of Activities presents revenues and expenses by net asset class and requires expenses to be reported by function (program vs. supporting services).

Unrelated Business Income Tax (UBIT) applies to a tax-exempt organization when it earns income from:

Answer: A trade or business regularly carried on that is not substantially related to its exempt purpose

UBIT applies when a 501(c)(3) or similar entity operates a trade or business regularly for profit that is not substantially related to the purpose that qualifies it for exemption.

Which of the following correctly describes how a not-for-profit organization recognizes contribution revenue?

Answer: At fair value when the contribution is unconditional and the organization has legal control

Unconditional contributions are recognized as revenue at fair value when received (or pledged), because no future performance is required by the donor.

A community foundation receives a gift with the stipulation that only the investment income may be used and the principal must be maintained in perpetuity. Under FASB ASC 958, this is reported as:

Answer: Net assets with donor restrictions — perpetual in nature

When a donor permanently restricts principal, the gift creates net assets with donor restrictions that are perpetual in nature, previously called 'permanently restricted.'

State and local governments must present which schedule as part of their pension-related required supplementary information under GASB 68?

Answer: Schedule of employer contributions and a schedule of changes in net pension liability

GASB 68 requires a 10-year schedule of employer contributions and a schedule of changes in the net pension liability as RSI to provide trend information on pension funding.

When a not-for-profit organization's board designates a portion of unrestricted net assets for a specific future project, this creates:

Answer: A board-designated (quasi-endowment) portion of net assets without donor restrictions

Board designations are internal decisions and do not create donor restrictions; the designated amount remains within net assets without donor restrictions but is labeled as board-designated.