This month, we’re giving you a one-two punch of free video lectures on what is one of the most hated and complex topics in the FAR section of the CPA Exam: Not-for-profit accounting.
In this jam-packed lecture, Prof. Don Deis of Texas A&M University-Corpus Christi tackles a host of not-for-profit accounting issues related to donations, pledges, contributions and net assets. Check back in a few weeks for Prof. Deis’s complementary Deep Dive video on these same topics.
This video lecture lasts just over 20 minutes. The floor is yours, Prof. Deis …
To help you absorb the concepts covered in Prof. Deis’s lecture, the complete Wiley CPAexcel lesson on this topic a;sp includes 39 slides, 23 AICPA practice questions, 9 proficiency questions, 9 flashcards, and abridged online study text (plus several chapters in the print textbooks).
Here’s a sample of some of the explanations in the lesson online study text (edited for length) … we’ll post the second half of the text with the Deep Dive video in a few weeks.
“Contributions” are unconditional, non-reciprocal receipts of assets or services. They are asymmetrical transactions in which one party relinquishes something of value to another party, but the other party provides nothing in return. This may be cash, marketable securities, inventory, property, or even services (subject to limitations). FASB ASC 958-605 (Statement #116-Accounting for Contributions Received and Contributions Made) provides guidance on revenue recognition for non-exchange transactions.
A. All unconditional contributions are recognized as contribution revenue in the period in which the contribution is made, regardless of whether it is in cash or not. Donations other than cash are recorded at fair value as of the date of the gift.
B. Conditional contributions depend on the occurrence of some future, uncertain event. In this case, revenue recognition occurs when the condition is met or the chance of not meeting the condition becomes remote. The not-for-profit should account for conditional contributions received (e.g., cash is deposited) as a refundable advance (liability) until the condition is met.
All revenue must be reported in one of three categories:
|Unrestricted||resources are available for expenditure in the current period for any purpose|
|Temporarily Restricted||resources are available for expenditure in the current period but only for specified (operating) purposes; these restrictions are known as “program restrictions”|
|Temporarily Restricted||resources are available for expenditure in the current period only for capital purposes; these restrictions are known as “asset acquisition” or “capital restrictions”|
|Temporarily Restricted||resources are available only after a specified time has elapsed or event has taken place: these restrictions are known as “time restrictions”|
|Permanently Restricted||resources are not available for expenditure at any time, although the earnings on the resources may be expended; permanently restricted assets are known as “endowments”|
We hope you’ve found these snippets of our lesson on the not-for-profit accounting topics of donations, pledges, contributions and net assets helpful. The full Wiley CPAexcel CPA Review Course has many other lessons on not-for-profit accounting as well as governmental accounting–two of the most-heavily tested topics on the FAR section.
If you would like a closer look at all that’s included in our bite-sized lessons, then you should sign up for a free two week trial of Wiley CPAexcel.
You can sign up here: Take a Free Trial.