Nonprofit Accounting Info: Special Issues Relating to Implementation of FASB Statements 116, 117, and 124
For an excellent summary of the special accounting rules affecting Nonprofit organizations Look at these guide lines published by Beta Alpha Psi (the honor organization for financial information students and professionals)
Go to this link to see the full guide: Special Issues Relating to Implementation of FASB Statements 116, 117, and 124
Here is what they say about Restricted Funding:
Frequently, donors stipulate how their gifts are to be used by placing restrictions on them. SFAS No. 116 requires recognition of contribution revenue upon the transfer of an economic benefit, usually the receipt of either the contribution (cash or other economic benefit) or a pledge (a promise to make a contribution in the future). Restrictions may be permanent, such as the establishment of an endowment in perpetuity, or they may be temporary, such as for next year's operations or a specific project.
The underlying concept of SFAS No. 116 is that receipt of restricted contributions does not amount to incurring a liability, but merely accepting limits on the future use of the contributions. The concept is based on the belief that adequate disclosure of donor-imposed restrictions and properly stated liabilities is more important than matching revenue and expenses.
Here is what they say about the classifying certain grant income as "contribtions" or "earned income"
.... However, many not-for-profit organizations receive "grants," "awards," or "sponsorships" that on the surface appear to be restricted contributions, but are in substance reciprocal or earned revenue transactions, because they amount to a contract for the purpose of services by the grantor or sponsor. This type of earned revenue can usually be identified by provisions that stipulate that the organization will receive a fixed amount per unit of service (such as per meal, per bed-day, etc.). Frequently, under such a contract, the organization must send the grantor a "voucher", which amounts to a statement of services provided and an invoice for the amount of the grant that was earned that month. The vouchers should be recorded as receivables. Sometimes, a grantor gives an organization an "advance" under the contract, knowing that payment for each month's voucher will not be paid for weeks or months; since the transaction is reciprocal, these advances should be recorded as deferred revenues (liabilities).
Go to this link to see the full guide: Special Issues Relating to Implementation of FASB Statements 116, 117, and 124
FASB: Tentative Board Decision Made: Financial statements of not-for-profit entities (phase 1).
See below for the FASB communication summarizing the tentative decision made at the 02/03/16 board meeting.
Quick summary:
1. Decision passed to require netting of external and direct internal investment expenses against investment return.
2. Decision passed not to require that not-for-profit entities (NFPs) disclose internal salaries and benefits that are netted against investment return.
3. Decision passed require all NFPs to disclose expenses by natural classification..
4. The board did not decide on the requirement for all not-for-profit entities to report on function and nature in a matrix or other format. The board is looking into whether certain "business-like" NFPs should be excluded from this requirement. It seems the board will then require the function and nature reporting in all NFPs and possibly carve out an exception for "business-like" entities. "Business-like" entities to be defined later if necessary.
You can access meeting agenda here.
You can view the webcast below;
February 3, 2016 FASB Board Meeting
TENTATIVE BOARD DECISIONS
Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
Financial statements of not-for-profit entities (phase 1).
The Board continued its Phase 1 redeliberations on the proposed FASB Accounting Standards Update, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities, focusing on the following topics:
- Netting of external and direct internal investment expenses against investment return
- Disclosure of netted investment expenses
- Expenses by nature and analysis of expenses by function and nature
- Enhanced disclosures about cost allocations and improved guidance on management and general activities.
Netting of External and Direct Internal Investment Expenses against Investment Return
The Board affirmed the proposal to require the netting of external and direct internal investment expenses against investment return. The Board also directed the staff to provide implementation guidance to illustrate what activities constitute direct internal investing activities.
Disclosure of Netted Investment Expenses
The Board decided not to require that not-for-profit entities (NFPs) disclose internal salaries and benefits that are netted against investment return. The Board affirmed its decision that NFPs are no longer required to disclose any other investment expenses that are netted against investment return.
Expenses by Nature and Analysis of Expenses by Function and Nature
The Board affirmed the proposal to require all NFPs to disclose expenses by natural classification. The Board also directed the staff to explore whether to exclude certain business-like NFPs from the current requirement to report expenses by function before considering whether to require an analysis of expenses by function and nature.
Enhanced Disclosures about Cost Allocations and Improved Guidance on Management and General Activities
The Board affirmed the proposal to require NFPs to provide enhanced disclosures about the method(s) used to allocate costs among program and support functions. The Board also affirmed the proposal to refine the FASB Accounting Standards Codification® definition of management and general activities and to provide additional implementation guidance to better depict the types of costs that can be allocated among program and/or support functions and those that should not be allocated.
IRS Withdraws Proposed Gift Substantiation Regulations
See Link here: IRS Withdraws Proposed Gift Substantiation Regulations
DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-138344-13] RIN 1545-BL94 Substantiation Requirement for Certain Contributions; Withdrawal AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Withdrawal of notice of proposed rulemaking. SUMMARY: This document withdraws proposed regulations that would implement the statutory exception to the “contemporaneous written acknowledgement” requirement for substantiating charitable contribution deductions of $250 or more. The withdrawal affects persons that make charitable contributions and organizations that receive charitable contributions.