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NOT FOR PROFIT ENTITIES period in which contribution is made, the

organization may report the contribution as


The concept of owner’s equity DOES NOT apply
unrestricted as long as the organization follows
a consistent policy

Three classes of net assets: Expenses (always) decrease unrestricted net


assets
(1) Permanently restricted
(2) Temporarily restricted NPE that issue GAAP-based FS must recognize
(3) Unrestricted depreciation expense on long-lived assets. NPE
should record depreciation even if assets are
Statement of Activities and Changes in Net gifts. However, certain works of art and certain
Assets historical treasures that meet the definition of
-reports revenues, expenses, gains and losses, “collections” need not be capitalized or
and reclassifications (between classes of net depreciated
assets) NPE reports revenues and expenses at gross
-focuses on organization as a whole amounts. Gains and losses from peripheral or
incidental transactions may be reported at net
-minimum requirements: organization-wide amounts and investment income is reported
totals, changes in net assets for each class of net of related expenses
assets, all expenses recognized only in the
unrestricted classification. A display of a Expenses and release of temporarily restricted
measure of operations in the statement of net assets
activities is permitted Temporarily restricted net assets that is fulfilled
Organizations can report revenues, gains, and is immediately reclassified as unrestricted. Also
losses in each net asset class, but expenses are because of the following:
reported only in the unrestricted net assets -Money was appropriately expended for an
class expense as designated by the donor
The statement of activities provides information -for an asset as designated by the donor
on the change in amount and nature of net
assets and reports how resources are used to -donor restriction based on time was satisfied
provide various program or services:
An alternative for equipment bought with the
Unrestricted net assets restricted gift does exist. Time restriction can be
-Not-for-profit revenues specified by the donor or assumed by the
-Gains and losses on investments organization for the use of the asset
*Unless their use is restricted by explicit donor
Statement of Functional Expenses
stipulations or by law

Temporarily restricted/permanently restricted


net assets consists of
-donor-restricted contributions whose
restrictions have not yet been met. If
restrictions are met in the same reporting

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