Fund Accounting & GAAP for NPOs Flashcards
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Under the UPMIFA (Uniform Prudent Management of Institutional Funds Act), what standard governs how nonprofits may spend endowment funds?
Answer: Prudent spending based on eight enumerated factors, including the fund's purpose, duration, and economic conditions
UPMIFA replaced the historical-dollar-value floor with a prudent-investor standard, listing eight factors (purpose, duration, economic conditions, etc.) for determining appropriate spending.
How does ASC 958 define 'net assets without donor restrictions'?
Answer: The portion of net assets not subject to donor-imposed stipulations
Net assets without donor restrictions are those not subject to donor-imposed stipulations and are available for general use at management and board discretion.
A nonprofit receives an in-kind donation of office equipment with a fair market value of $8,000. How should this be recorded under GAAP?
Answer: Debit fixed assets $8,000, credit contribution revenue $8,000
Non-cash (in-kind) contributions of tangible assets are recorded at fair market value as both an asset and contribution revenue per ASC 958-605.
Which financial statement replaces the 'balance sheet' in nonprofit GAAP reporting?
Answer: Statement of Financial Position
Nonprofits use the 'Statement of Financial Position' (rather than 'balance sheet') to present assets, liabilities, and net assets at a point in time.
Which method of cash flow presentation do most nonprofits use, and what supplemental disclosure is required when using it?
Answer: Indirect method; a reconciliation of change in net assets to net cash from operations is required
Most nonprofits use the indirect method, which requires reconciling the change in net assets to net cash provided by operating activities as a supplemental disclosure.
When a nonprofit allocates joint costs (e.g., a fundraising mailing that includes a programmatic message), which standard governs the allocation?
Answer: ASC 958-720, which permits allocation among program, management, and fundraising if three criteria are met
ASC 958-720 allows joint costs to be allocated among program, management/general, and fundraising functions when the purpose, audience, and content criteria are all met.
Under GAAP, how should a nonprofit account for a split-interest agreement such as a charitable remainder trust where the nonprofit is the remainder beneficiary?
Answer: Record its beneficial interest at the present value of the expected remainder interest when the trust is established
For charitable remainder trusts, nonprofits recognize a contribution equal to the present value of their remainder interest at the date the trust is established, per ASC 958-605.