CNC Fund Accounting & GAAP for NPOs 3

Question 1

Under the UPMIFA (Uniform Prudent Management of Institutional Funds Act), what standard governs how nonprofits may spend endowment funds?

Accepted Answer

Prudent spending based on eight enumerated factors, including the fund's purpose, duration, and economic conditions

Answer

UPMIFA replaced the historical-dollar-value floor with a prudent-investor standard, listing eight factors (purpose, duration, economic conditions, etc.) for determining appropriate spending.

Question 2

How does ASC 958 define 'net assets without donor restrictions'?

Accepted Answer

The portion of net assets not subject to donor-imposed stipulations

Answer

Net assets without donor restrictions are those not subject to donor-imposed stipulations and are available for general use at management and board discretion.

Question 3

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?

Accepted Answer

Debit fixed assets $8,000, credit contribution revenue $8,000

Answer

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.

Question 4

Which financial statement replaces the 'balance sheet' in nonprofit GAAP reporting?

Accepted Answer

Statement of Financial Position

Answer

Nonprofits use the 'Statement of Financial Position' (rather than 'balance sheet') to present assets, liabilities, and net assets at a point in time.

Question 5

Which method of cash flow presentation do most nonprofits use, and what supplemental disclosure is required when using it?

Accepted Answer

Indirect method; a reconciliation of change in net assets to net cash from operations is required

Answer

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.

(CNC) Certified Nonprofit Consultant Practice Test

(CNC) Certified Nonprofit Consultant Practice Test

CNC Fund Accounting & GAAP for NPOs 3