Poor us, I know. Does anyone know about SFAS ? There's a section on net assets where you fill out certain items if you're following SFAS , and different items if you're not.
I'm wondering if most PTOs follow it because we don't ever deal with any of the complicated things that huge non-profits do. As a side note: I have a vague impression that the IRS, as part of phasing in the new for next tax year, is expanding the range of groups that can use EZ. But I suppose this doesn't apply for this year. It's a set of accounting standards. None of the PTO's I've worked with have gotten to that income level, so we haven't checked into this.
There's a lot on the Internet, but I don't know how hard or easy it would be for a non-financial person to do it. I'd think it would be difficult to retroactively claim as the financial statements and accounting processes are pretty specific. Actually, parent groups should be checking the box saying that they are following SFAS ; I believe it was mandated for virtually all nonprofits something like 10 years ago.
SFAS has more to do with external presentation of financial statements, or how you present them to the public, than how you do day to day accounting.
I would guess that for most, you are only going to have unrestricted. Unrestricted assets are what you end up with when people give you money without any restrictions as to how you might use it. An established fund of cash, securities, or other assets to provide income for the maintenance of a not-for-profit organization. The use of the assets of the fund may be permanently restricted, temporarily restricted, or unrestricted. Endowment funds generally are established by donor-restricted gifts and bequests to provide a permanent endowment, which is to provide a permanent source of income, or a term endowment, which is to provide income for a specified period.
The portion of a permanent endowment that must be maintained permanently—not used up, expended, or otherwise exhausted—is classified as permanently restricted net assets. The portion of a term endowment that must be maintained for a specified term is classified as temporarily restricted net assets. A board-designated endowment, which results from an internal designation, is not donor restricted and is classified as unrestricted net assets. A method of grouping expenses according to the purpose for which costs are incurred.
The primary functional classifications are program services and supporting activities. An entity that possesses the following characteristics that distinguish it from a business enterprise: a contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return, b operating purposes other than to provide goods or services at a profit, and c absence of ownership interests like those of business enterprises.
Not-for-profit organizations have those characteristics in varying degrees Concepts Statement 4,. A donor-imposed restriction that stipulates that resources be maintained permanently but permits the organization to use up or expend part or all of the income or other economic benefits derived from the donated assets.
The part of the net assets of a not-for-profit organization resulting a from contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization, b from other asset enhancements and diminishments subject to the same kinds of stipulations, and c from reclassifications from or to other classes of net assets as a consequence of donor-imposed stipulations Concepts Statement 6,.
Donor-restricted revenues or gains from contributions that increase either temporarily restricted net assets or permanently restricted net assets. Also refer to. The part of the net assets of a not-for-profit organization resulting a from contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the organization pursuant to those stipulations, b from other asset enhancements and diminishments subject to the same kinds of stipulations, and c from reclassifications to or from other classes of net assets as a consequence of donor-imposed stipulations, their expiration by passage of time, or their fulfillment and removal by actions of the organization pursuant to those stipulations Concepts Statement 6,.
A donor-imposed restriction that permits the donee organization to use up or expend the donated assets as specified and is satisfied either by the passage of time or by actions of the organization.
The part of net assets of a not-for-profit organization that is neither permanently restricted nor temporarily restricted by donor-imposed stipulations Concepts Statement 6,. Revenues or gains from contributions that are not restricted by donors. Organizations formed for the purpose of performing voluntary services for various segments of society. Most voluntary health and welfare organizations concentrate their efforts and expend their resources in an attempt to solve health and welfare problems of our society and, in many cases, those of specific individuals.
As a group, voluntary health and welfare organizations include those not-for-profit organizations that derive their revenue primarily from voluntary contributions from the general public to be used for general or specific purposes connected with health, welfare, or community services Audits of Voluntary Health and Welfare Organizations, preface.
Link copied. Related content 1 of. FAS Statement of cash flows. FAS Recognition of depreciation by not-for-profit organizations. FAS Financial statements of not-for-profit organizations. Chapter 3: Working capital. Chapter 2: Form of statements. FAS 5: Accounting for contingencies.
FAS Consolidation of all majority-owned subsidiaries. FAS Accounting for the impairment or disposal of long-lived assets. FAS Accounting for certain investments held by not-for-profit organizations. Examples 1 of. Effective date 1 of. Frequently asked questions 1 of. Industry insights 1 of. Subject matter experts 1 of. Please ensure that you select Print Background colors and images when printing. Search within this section Select a section below and enter your search term, or to search all click Original Pronouncements, as amended.
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Sign in Cancel. Up next. Hello and welcome to Viewpoint Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. Before we start. Choose your preferred language below. Your browser does not support the video tag. Back to the Original document. Designated by the Board for [ purpose ]. Not-for-Profit Organization. Statements of Financial Position. June 30, 19X1 and 19X0. Accounts and interest receivable. Inventories and prepaid expenses. Assets restricted to investment in land, buildings, and equipment.
Land, buildings, and equipment. Temporarily restricted Note B. Permanently restricted Note C. Statement of Activities. Year Ended June 30, 19X1. Income on long-term investments Note E. Other investment income Note E. Net unrealized and realized gains on long-term investments Note E. Total unrestricted revenues and gains. Satisfaction of program restrictions. Satisfaction of equipment acquisition restrictions. Expiration of time restrictions.
Total net assets released from restrictions. Total unrestricted revenues, gains, and other support. Actuarial loss on annuity obligations. Net assets released from restrictions Note D. Decrease in temporarily restricted net assets.
Increase in permanently restricted net assets. Total revenues, gains, and other support. Statement of Unrestricted Revenues,Expenses, and. Other Changes in Unrestricted Net Assets. Total unrestricted expenses and losses. Statement of Changes in Net Assets. Unrestricted revenues, gains, and other support. Restricted revenues, gains, and other support:.
Total revenues, gains and other support. Unrestricted expenses and losses. Statement of Cash Flows. Cash received from service recipients.
Cash received from contributors. Cash collected on contributions receivable. Interest and dividends received. Cash paid to employees and suppliers. Net cash used by operating activities.
Insurance proceeds from fire loss on building. Proceeds from sale of investments. Net cash used by investing activities. Proceeds from contributions restricted for:. Investment in term endowment. Investment subject to annuity agreements. Other financing activities:. Interest and dividends restricted for reinvestment.
Payments of annuity obligations. Increase in accounts and interest receivable. Decrease in inventories and prepaid expenses. Increase in contributions receivable. Most respondents agreed with the advisory recommendation of the AICPA task force that a balance sheet statement of financial position , a statement of changes in net assets statement of activities , and a statement of cash flows should be required parts of a complete set of financial statements.
The Board agreed; it concluded that three financial statements are necessary to provide the variety of information needed to meet the financial reporting objectives of a not-for-profit organization and to report that information in ways that are both comprehensive and understandable. A statement of financial position, a statement of activities, and a statement of cash flows, used with related disclosures, provide information that is useful in assessing a the services an organization provides and its ability to continue to provide those services and b how managers discharge their stewardship responsibilities and other aspects of their performance.
A majority of respondents agreed that the three basic financial statements should be required. However, some respondents to the Exposure Draft said that a statement of cash flows should not be a required part of a set of financial statements. They said that the additional information it provides may not be sufficiently useful to justify the added cost or may add confusion. However, most users of financial statements that participated in the field test found the statement of cash flows helpful or said the statement enhanced their understanding of the organization.
The Board concluded that the changes required by this Statement will result in greater comparability, completeness, and clarity in the financial statements issued by not-for-profit organizations, which should enhance significantly the understanding of the information provided by their financial statements. The direct beneficiaries of that information are likely to be present and potential donors, members, and creditors of not-for-profit organizations, which include individuals, foundations, and government granting agencies.
Indirectly, not-for-profit organizations and society are likely to benefit from improved information that may lead to more efficient and effective decisions about how resources are allocated. The Board believes that not-for-profit organizations generally have management information systems that provide the basic information needed to prepare a set of financial statements that conform to the provisions of this Statement and that the benefits of the information provided generally exceed the costs to provide that information.
The Board continues to believe that "ideally, financial reporting also should provide information about the service accomplishments of a [not-for-profit] organization" Concepts Statement 4, paragraph However, this Statement emphasizes information to be reported in financial statements.
Since information about service accomplishments generally is not measurable in units of money, it cannot be included and reported in the totals of the financial statements. Some respondents said that a statement that reports expenses by both functional and natural classifications is necessary.
Others said that a statement that reports operating revenues and expenses separate from other revenues and expenses should be required. Still others said that comparative financial statements for the prior period should be a required part of a complete set of financial statements. The Board considered whether all not-for-profit organizations should provide information about expenses by a functional classification, b natural classification, c either functional or natural classification at the option of the organization, or d both functional and natural classification.
It also considered whether they should provide that information in a financial statement or in notes to financial statements. The Board concluded that information about expenses by function, such as major programs or services and major classes of supporting services, is necessary to an understanding of a not-for-profit organization's service efforts and that a set of financial statements should include that information.
Requiring that information also is a step toward providing information that may be useful in associating an organization's expenses with its accomplishments. The Board concluded that information about an organization's expenses by function may be meaningfully communicated either in a statement of activities or in notes to financial statements.
The Board also concluded that information about the costs of significant programs or services are both relevant and measurable with sufficient reliability. Many costs are directly related to a major program or service or to a supporting activity. Some costs relate to two or more major programs and may require allocations. Techniques for allocating costs among significant programs or services are reasonably well developed; allocating costs among segments, products or services, and accounting periods are common in general-purpose accounting and reporting, managerial accounting, tax accounting, and contract accounting of all entities.
This Statement provides latitude for organizations to define their major programs and determine the degree of aggregation used when reporting expenses of major programs. That latitude has several advantages. Foremost, it allows organizations to report in ways that they believe are meaningful, related to their service efforts, and consistent with internal management information systems.
That latitude allows organizations to use existing cost-allocation systems to provide the information necessary to comply with this Statement. Some respondents to the Exposure Draft said reporting expenses by function should not be required because that would be more stringent than reporting required of business enterprises.
The Board concluded, however, that this difference, which stems from different indicators of performance of not-for-profit organizations and business enterprises, is appropriate and necessary. Paragraph 9 of Concepts Statement 4 explains that not-for-profit organizations "generally have no single indicator of performance comparable to a business enterprise's profit. Thus, other indicators of performance are usually needed.
Furthermore, the Board observes that a requirement for information about a not-for-profit organization's expenses by function is similar to standards that require information about a business enterprise's industry segments. The Board decided not to require not-for-profit organizations to provide an analysis of expenses by natural classification. Some respondents said that information about expenses by natural classification may be essential in understanding the ability of an organization to continue to provide services and about the nature of the costs of providing those services.
They noted that information about relatively fixed costs, such as salaries, versus discretionary costs, such as grants to subrecipients or awards to others, can be particularly useful. The Board agrees that information about expenses by natural classification often is useful and encourages organizations to provide that information. However, it also believes that information about expenses by natural classification may not be essential in understanding the service efforts of all not-for-profit organizations or in assessing the ability of all organizations to continue to provide services.
This Statement requires that voluntary health and welfare organizations continue to provide a statement that reports expenses by their functional and natural classifications in a matrix format.
The Board believes that requirement is appropriate to prevent the loss of information that voluntary health and welfare organizations and users of their financial statements generally have found to be useful. The Board concluded that before extending that requirement to other organizations, further study is necessary to determine whether other cost-beneficial means of reporting information useful in associating expenses with service efforts might be developed.
Some respondents to both the Invitation to Comment and the Exposure Draft suggested that a statement of activities should be divided into two parts, a statement of "operations" and a statement of other changes in net assets. They generally suggested that the first statement would report "operating" revenues and expenses and would be accompanied by another statement that would report all other revenues, gains, expenses, and losses and the change in net assets for the organization as a whole.
They said that a separate operating statement is needed with a "bottom line" different from change in net assets. However, the respondents who expressed that view differed on how to define an operating measure and on which revenues and expenses would be included in or excluded from "operations. Others would exclude gifts restricted to specified operating purposes if those purposes were not met in the current period.
Some would exclude from "operations" revenues, gains, or losses from nonrecurring, unexpected, or unusual events such as a very large bequest, an insurance gain on a fire loss, or an unexpected loss contingency. Others would include some or all of those items. The AICPA task force also considered whether a distinction should be made between operating and nonoperating activities and, if so, whether it should be accomplished within a statement of changes in net assets or through separate statements.
In paragraph of its report, the task force said that as it "tried to find a universal definition of 'operations' in a not-for-profit environment, differences in the use of that term became more apparent. In fact, it became clear that distinctions based on operations tend to be arbitrary. To define "operations" for business enterprises has proved equally problematic. Most respondents to the Exposure Draft that commented on this matter agreed that this Statement should not preclude making so-called operating or nonoperating or other distinctions within each of this Statement's required classes of net assets.
A few respondents and FASB task force members suggested, however, that because terms such as operating income, operating profit, operating surplus, operating deficit , and. The Board decided that if an intermediate measure of operations is reported, it should be in a financial statement that, at a minimum, reports the change in unrestricted net assets for the period.
This Statement also specifies that if an organization's use of the term operations is not apparent from the details provided on the face of the statement, a note to financial statements should describe the nature of the reported measure of operations or the items excluded from operations. Appendix C illustrates how an intermediate measure of operations might be presented in financial statements.
The Invitation to Comment asked whether a complete set of financial statements should include prior-year comparative information in essentially the same form as financial statements for the current period. Most respondents agreed with the AICPA task force advisory conclusion that prior-year comparative information should be encouraged but not required and that if presented, prior-year information should comply with the minimum requirements for a set of financial statements.
The usefulness of information about an entity increases if that information can be compared with similar information for other periods, but at times it may be impractical or impossible to provide comparative information on a fully consistent basis of accounting.
For example, if a business enterprise or not-for-profit organization changes from a cash basis to an accrual basis of accounting, comparable information for periods before the change may be impossible or too expensive to obtain because of the way accounts were kept. The Board found no reason to impose a more stringent standard for reporting by not-for-profit organizations.
Most respondents to the Exposure Draft agreed; others generally said that comparative financial statements should be required. The Board believes that aggregated information about an entity as a whole facilitates an overall understanding of its financial position, results of its operations, and its cash flows. It concluded that reporting certain basic totals, such as total assets, liabilities, net assets, change in net assets, cash and cash equivalents, and change in cash and cash equivalents, will improve the understandability, usefulness, and completeness of financial reporting by not-for-profit organizations.
It also believes that that basic information is necessary to an overall understanding of the entity's financial position, results of its operations, and its cash flows. Summary amounts also are useful in assessing an entity's financial strengths and weaknesses over periods of time, and they provide a basis for further inquiry and analysis of the reasons why its net assets increased or decreased, the causes of the changes in its cash and other liquid assets, and so forth.
Summary amounts also are helpful in comparing a not-for-profit organization with other organizations, including similar entities in the profit-making or governmental sectors. In assessing the financial position or performance of a not-for-profit organization, however, the Board believes it is important to avoid focusing attention almost exclusively on net assets, change in net assets, total assets, or other highly simplified and aggregated amounts.
For example, in Concepts Statement No. Accordingly, this Statement requires not only summary amounts that focus on a not-for-profit organization as a whole but also information about items and components of those amounts; for example, it generally requires reporting information about the gross amounts of items of revenues and expenses and of cash receipts and cash payments.
The Board concluded that the usefulness of information provided by financial statements of not-for-profit organizations could be vastly improved if certain basic information is classified in comparable ways. The Board decided that all not-for-profit organizations should:. Report assets and liabilities in reasonably homogeneous groups and sequence or classify them in ways that provide relevant information about their interrelationships, liquidity, and financial flexibility. Aggregate items of revenues, expenses, gains, and losses into reasonably homogeneous groups and classify and report them as increases or decreases in permanently restricted, temporarily restricted, or unrestricted net assets.
Classify and report cash receipts and cash payments as resulting from investing, financing, or operating activities. The Board concluded that those broad classifications are among the minimum requirements necessary to meet the objectives of financial reporting by not-for-profit organizations paragraphs 43 and Classifying and aggregating items with similar characteristics into reasonably homogeneous groups and separating items with differing characteristics is a basic reporting practice that increases the usefulness of information.
For example, cash collections of receivables from patients, students, or other service recipients may differ significantly in continuity, stability, and risk from cash collections of pledges made to a special-purpose fund-raising campaign. Classifying and reporting those receivables and collections of receivables as separate groups of assets and of cash inflows facilitates financial statement analysis aimed at objectives such as predicting amounts, timing, and uncertainty of future cash flows.
Perhaps the most prevalent problem in current practice is that not-for-profit organizations report their financial position and the effects of transactions, events, and circumstances that change the amount and nature of their net assets in significantly different ways.
Many not-for-profit organizations report information for groups of assets and related liabilities of four or more individual fund groups, either in several columns on a single page or in statements on separate pages. Some also include a total column or measures of total assets, liabilities, and net assets of the organization; however, many do not. Although disaggregated information can be useful, differing definitions and terminology for reporting disaggregated fund groups make current financial reporting by not-for-profit organizations difficult to understand.
Some organizations use internally defined fund groups that focus on measures of importance to an organization's managers rather than on the common information needs of external users of its financial statements.
Other organizations focus on measures or fund groups unique to their particular industry. Nonetheless, it often is said to be an "operating statement" or said to present the operating surplus, deficit, or "bottom line" for the period. The Board believes this Statement's basic requirements for classifying information in financial statements will lead to more relevant, comparable, and understandable financial reporting by not-for-profit organizations.
More prescriptive standards that require information to be classified in ways that go beyond the minimum requirements of this Statement may result in further improvements. However, because not-for-profit organizations are diverse and many are complex entities, the Board decided that it is best at this time to allow sufficient latitude for financial reporting practices to continue to evolve.
The Board also believes that AICPA Guides and industry groups are likely, as in the past, to provide guidance to meet more specific needs for disaggregated information that may arise in practice. The Invitation to Comment raised several questions about whether specified financial statement formats should be required, permitted, or precluded. For example, the AICPA task force suggested that information about revenues, expenses, gains, and losses for each of three classes of net assets should be allowed to be reported on a single page with no organization-wide totals for each item.
That task force also suggested that a standardized format should not be required. Views of respondents to the Invitation to Comment were divided.
Most would require columnar formats, although a large minority would not. Many would require totals for items of an entity's revenues, expenses, gains, and losses, but many would not. Many of those that would require or preclude particular formats are concerned that unstructured disaggregated information may obscure other essential and meaningful information.
Except as noted in paragraph 68, the Board decided to neither prescribe nor prohibit particular formats for a statement of financial position, a statement of activities, or a statement of cash flows, in part because similar prescriptions and proscriptions do not exist for business enterprises. The Board also concluded that standards for reporting financial information should focus on the content of financial statements, that is, on the basic information to be provided in financial statements.
Most respondents to the Exposure Draft agreed. The Board expects this Statement's focus on certain basic aggregated information will place practical limits on the number of differing ways information is formatted and that those practical limits will eliminate most concerns about highly disaggregated information.
The Board also expects that, as in the past, industry associations will encourage their member organizations to adopt, within the parameters of this Statement, reasonably common and preferable practices for reporting information in financial statements. Information that helps resource providers and others identify the organization's financial strengths and weaknesses, evaluate its performance during the period, and assess its ability to continue to render services is relevant.
The Board concluded that a statement of financial position should report the aggregated totals for an organization's assets, liabilities, and net assets. These totals are helpful in assessing the interrelationship of an organization's assets and liabilities and, together with information about the components of assets, liabilities, and net assets, are necessary to an understanding of an organization's financial position.
In paragraph of its report, the AICPA task force explicitly recommended that the aggregated total of an organization's net assets be presented in a statement of financial position. Respondents to the Invitation to Comment generally agreed. The Invitation to Comment did not ask whether not-for-profit organizations should report aggregated totals for assets and liabilities.
However, the AICPA task force recommended that amounts for items of assets, liabilities, and net assets be presented as a self-balancing group of amounts in a single column, which suggests that highly aggregated totals would be presented. A single group of amounts also implies exclusion or elimination of interfund amounts that could overstate an organization's total assets and total liabilities.
This Statement emphasizes the need for information about both aggregated totals for assets, liabilities, and net assets and about reasonably homogeneous groups of items of assets and liabilities.
Because the Board decided not to emphasize or preclude specific statement formats, this Statement permits a left-to-right or top-to-bottom "balanced" format as well as single-column, multicolumn, single-page, or multipage formats. The Board believes that the provisions of this Statement applied with other generally accepted accounting principles will provide relevant information about the amounts and nature of differing kinds of assets and liabilities, either through disclosures in a statement of financial position or in accompanying notes to financial statements.
Some respondents said that the requirements should be more permissive, but many others said that they should be more prescriptive. For example, many agreed that a classified statement of financial position should be permitted but they would not require that or the alternative breakout of the net asset section.
Many others said a classified statement should be required. Others said that a nearness to cash method of classification should be required.
The Board concluded that reporting the net equity invested in property, plant, and equipment within the net asset section is not a substitute for arranging or classifying items of assets and liabilities in ways that provide information about liquidity.
The Board believes that essential information about liquidity and an organization's financial flexibility can be provided either by classifying assets and liabilities as current and noncurrent or by sequencing assets according to their nearness of conversion to cash and liabilities according to the nearness of their maturity and resulting use of cash.
Each method has advantages and practical limitations. Classifying assets and liabilities as current and noncurrent, although not required by generally accepted accounting principles, is a common reporting practice of both business enterprises and not-for-profit organizations. As others have noted, 9 this classification alone generally does not provide users of financial statements with the liquidity information they need.
Thus, other disclosures must be added to the financial statement or notes to financial statements. More recently, financial reporting has emphasized information about changes in cash and cash equivalents, and that new emphasis obviates the need for a rigid requirement to classify and report amounts of current assets and current liabilities.
For many small or less-complex organizations, grouping homogeneous items of assets and liabilities and sequencing them according to nearness of cash or maturity is sufficient. Further distinctions at higher degrees of aggregation, such as current and noncurrent assets and liabilities, generally would be unnecessary.
They believe that at this time it is best to avoid prescriptive standards that might stand in the way of those evolving reporting practices.
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