高级会计学英文版资料：Chap018 ACCOUNTING AND REPORTING FOR PRIVATE NOT-FOR-PROFIT ENTITIES

1、CHAPTER 18ACCOUNTING AND REPORTING FOR PRIVATE NOT-FOR-PROFIT ENTITIESChapter OutlineHistorically, the financial reporting for private not-for-profit entities has differed significantly according to the type of organization (such as a health care entity versus a college or university). The reporting

2、 of these entities has now been largely standardized by FASB pronouncements that focus on (a) the reporting of financial statements for the entity as a whole and (b) significant events such as the receipt of contributions and the recording of mergers and acquisitions. However, public colleges and un

3、iversities and similar organizations still must follow the standards issued by GASB.This chapter examines the financial reporting for private not-for-profit entities with special emphasis on private colleges and universities, voluntary health and welfare entities, and health care operations.Reportin

4、g for these entities is usually similar to a business enterprise unless critical differences exist that impact the needs of financial statement users. Several of these critical differences can be identified.Many private not-for-profit entities receive a significant amount of their financial resource

5、s from contributions rather than from revenues or capital investments.A significant amount of the financial resources given to a private not-for-profit entity include donor-imposed restrictions.No single indicator of success is present in the financial reporting. No number such as net income provide

6、s a means for evaluation as it does with a for-profit business.FASB has established the following financial statements for private not-for-profit entities.Statement of Financial Position reports assets, liabilities, and net assets.Statement of Activities reports revenues, expenses, gains, and losses

7、.Statement of Cash FlowsA voluntary health and welfare entity is also required to present a Statement of Functional Expenses which indicates the amount of resources spent for program services (to meet the goals of the entity) and supporting services (to operate the entity and raise funds).For report

8、ing purposes, all economic resources held by a private not-for-profit entity are classified within one of three categories.Unrestricted net assets indicates the amount of an entitys resources that are not subject to external donor restrictions. Entity officials can make whatever use they wish of the

9、se assets.Temporarily restricted net assets are restricted by an outside party (often a donor) for a particular purpose or for use in a future period of time. When the restriction is eventually satisfied, the classification of these resources is switched to unrestricted net assets. At that time, on

10、the statement of activities, temporarily restricted net assets are affiliated entity is used for recording purpose since it mirrors fair value here.). A (Patient service revenue is reduced by any charity care services. That amount is not recorded because the entity does not expect to be paid. In add

11、ition, a direct reduction is shown for the provision for doubtful accounts. Thus, net patient service revenue is $1 million less $94,000 and $200,000 or $706,000.). C (Charity care is not recorded by a not-for-profit health care entity because the entity provided services for individuals with no abi

12、lity to pay. The financial impact of that decision must be disclosed in a note to the financial statements that provides information about the direct and indirect costs of these services.).D (The charity must convey the donation to the designated beneficiary. Unless the charity was given variance po

13、wers that allowed it to change the beneficiary, this donation represents a liability to the Jones family. The gift is simply being passed through the charity in the form of furniture to the ultimate beneficiary.).B (In this way, no financial benefit accrues to the charity from the sale of the artifa

14、ct.)A (Because of the time restriction, the amount spent for playground equipment remains in temporarily restricted net assets until depreciated. The equipment was bought at the end of the current year so that no depreciation was recorded and no reclassification was made. The $80,000 was properly sp

15、ent on the salaries for the teachers and must be reclassified from temporarily restricted net assets to unrestricted net assets when the expense is recognized.)A (The key factor here is that YZ is expected to be predominantly supported by contributions. Thus, future exchange revenues will likely be

16、minor. The acquisition value ($1 million) in excess of the fair value of all assets and liabilities ($700,000) is $300,000. Because most support comes from contributions and investment income, this $300,000 is charged off against unrestricted net assets on the statement of activities. No goodwill is

17、 recognized.)A (When two not-for-profit entities come together to form a new not-for-profit entity with a new governing board, a merger has occurred. In reporting a merger, the carryover method is used. Thus, book value of individual assets and liabilities is retained. The $300,000 book value for BC

18、s landplus the $500,000 book value for OPs land gives a reported land account of $800,000.)B (This transaction is an acquisition and the acquired entity is not supported predominantly by contributions or investment income. Thus, the difference in the acquisition value of Northeast ($980,000) and the

19、 fair value of the two recognized assets ($950,000 or $150,000 plus $800,000) is recognized as goodwill.)DCCC (The charity care work should not be recorded in any way because the entity has no expectation of collection. That reduction drops the reported amount for patient service revenue to $600,000

20、. The contractual adjustment is reported as a contra balance to the revenue reducing it to a net amount of $400,000. Likewise, the provision for bad debts reduces the net patient service revenue another $100,000 to $300,000.)B (Use of the money is limited to the donors specified purpose.)B (This don

21、ated service meets the rules for recognition. The expense and the contributed support are both reported.)A (Form 990 is the annual informational form that most tax-exempt organizations are required to file by the IRS.)A (As an educational institution, Belwood University will qualify as a 501(c)(3) t

22、ax-exempt organization.)D (These volunteer services, although important, do not meet the criteria for recognition. They do not require a specialized skill that would be otherwise purchased. They do not enhance a nonfinancial asset.)B (The gift was not specifically designated for this particular fami

23、ly so the entity recognizes both the revenue and expense.)A (The work performed requires a specialized skill that would otherwise have to be acquired by the not-for-profit entity.)BA (The fundraising costs and administrative salaries are supporting service expenses.)BD(10 minutes) (Reporting of vari

24、ous account balances by a not-for-profit health care entity)Donated medicines = an asset is reported as well as an increase in unrestricted net assets because of the contributionDonated services (replacing salaried workers) = the fair value of the services contributed causes an increase in unrestric

25、ted net assets along with an accompanying decrease in unrestricted net assets because the expense is also recognizedDonated services (not replacing salaried workers) = not recorded Interest income = revenue is an increase in unrestricted net assets Charges to patients = increase in unrestricted net

26、assets shown as net patient service revenuesCharity care = not recorded if the entity has no intention of seeking collection; if an amount has been recorded, it must be removed from the receivable and the revenue.Provision for bad debts = amount is anticipated and this provision for bad debts is rep

27、orted as a direct reduction in patient service revenues to arrive at net patient service revenues.(15 Minutes) (Series of questions about the reporting of health care entities)A third-party payor is an entity (such as Medicare or an insurance company) that pays a portion, or all, of a patients medic

28、al expenses. They are common due to the extremely high cost of medical care. Because of their need for accurate financial information, such third party payors have exerted pressure on health care entities over the decades to develop adequate accounting principles and reliable accounting systems.A co

29、ntractual adjustment is a reduction to patient service revenues created when a lesser amount is paid by a third-party payor than the billed amount but is still accepted as payment in full by a health care entity. These outside parties often establish contractual arrangements whereby the health care

30、entity agrees to accept a lower amount for a service if the third party determines the figure to be reasonable in that particular area. These contractual adjustments create an accounting problem for the health care entity because the amount that eventually will be collected is not always known. Thus

31、, the entity recognizes the full amount of the invoice as patient service revenue at the time the service is performed. The entity then estimates and establishes an offsetting Contractual Adjustment account to reduce the net reported revenue to the amount anticipated as being collected.At the time t

32、hat materials are donated to a health care entity (or any private not-for-profit entity), the asset is recorded at fair value. Because of the donation, the contribution is recognized as an increase in unrestricted net assets. If the asset has a finite life, officials can assume a time restriction on

33、 the use of the asset so that the contribution is reported initially as an increase in temporarily restricted net assets. An amount is also reclassified to unrestricted net assets each period equal to depreciation expense.Donated services are recorded as a contribution increasing unrestricted net as

34、sets and as salary expense also within unrestricted net assets. FASB requires private not-for-profit entities to recognize donated services but only if they (a) enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would need to be pu

35、rchased if not provided by donation. If the donated service enhances a nonfinancial asset, an increase in the assets reported balance is recognized rather than as salary expense.(6 Minutes) (Reporting of various accounts by a not-for-profit entity)Only $7.6 million is reported as patient service rev

36、enues. Charity care of $1.4 million is not recorded because no attempt at collection is anticipated. Then, the $800,000 contractual adjustment is netted with the revenue to leave the hospital with a net patient service revenue figure to report of $6.8 million.The supplies are recorded at their $4,00

37、0 value with an offsetting increase in unrestricted net assets as a result of the contribution. As the supplies are used, the $4,000 asset will be reclassified as an expense.a). (8 Minutes) (Recording donations by a voluntary health and welfare entity)Pledges $600,000Anticipated Amount Deemed to be

38、Uncollectible (15%)(90,000)Net Pledge Balance $510.000Increase in Unrestricted Net Assets in 2015 Contributed S叩port (60% of above) $306,000Increase in Temporarily Restricted Net Assets in 2015Contributed Support (40% of above)$204.000b). Both contributed support and salary expense are recognized as

39、 $12,000 ($20 per hour times 600 hours) within unrestricted net assets. No overall effect is created on net assets but impact of the donation is reflected.40.(65 Minutes) (Preparation of statements for a private not-for-profit entity)40. (continued)a.Statement of ActivitiesUnrestrictedTemporarily Re

40、strictedPermanently RestrictedNet AssetsNet AssetsNet AssetsPublic Supporta. Contributions$210,000$78,000b. ContributionInterest3,000Revenuec. Membership dues30,000d. Investment income3,9009,100e.Net assets released fromrestriction72,000(72,000)Total Public Support andRevenue$315,900$18,100ExpensesP

41、rogram service expensesCure diseasef. Salaries(26,500)g. Depreciation(16,000)h. Supplies(93,000)Total(135,500)Supporting service expenses-General and administrativei. Salaries(32,000)j. Depreciation000)Total(34,000)-Fundraisingk. Salaries(26,500)I. Advertising(2,000)m. Depreciation(2,000)Total(30,50

42、0)Total Expenses(200,000)Change in Net Assets$115,900$18,100-0-Net Assets - Beginningof Year400,000200,000$100,000Net Assets - End of Year$51549fm$218.100$100400AExplanation of BalancesContributions. The balances to be reported are the unrestricted gifts ($210,000) plus present value of unrestricted

43、 pledge ($78,000). Pledge is viewed as temporarily restricted because it will not be collected for three years.Contribution-Interest. The pledge is recorded at its present value of $78,000. Interest that is recognized to raise the balance to the pledge amount is reported as a contribution.Membership

44、 dues. The amount received is shown as revenue and not as public support because rights are being conveyed to the members equal in value to the amount collected.Investment income. Although this income ($13,000) is earned on permanently restricted net assets, 70 percent is shown as temporarily restri

45、cted because the donor has specified that it must be spent on advertising. The remaining 30 percent is unrestricted.Net assets released from restriction. Three restricted amounts were properly spent during the period: $20,000 for salaries, $50,000 for equipment, and $2,000 for advertising. No implie

46、d time restriction was assumed for the equipment so the entire reclassification was made immediately.Salaries. During the period, $24,000 in salaries were paid (30 percent of $80,000 was assigned here) and another $2,500 was owed at the end of the year (50 percent of year-end accrual).Depreciation.

47、Of the total expense ($20,000) for the period, 80 percent was allocated to program service expenses because that amount of the equipment was used for that purpose.Supplies. A total of $93,000 was acquired and used during the year.Salaries. Administrative salaries amounted to $32,000 for the year (40

48、 percent of overall total).Depreciation. Of the total for the period, 10 percent was allocated to general and administrative expenses.Salaries. During the period, $24,000 was paid in salaries (30 percent of $80,000 was assigned here) and another $2,500 was owed at the end of the year (50 percent of

49、year-end accrual).Advertising. Only $2,000 in advertising costs were incurred during the period.Depreciation. Of the total for the period ($20,000), 10 percent was allocated to fundraising expenses.-Because it qualifies as a museum piece, recording of the painting is optional. Officials do not want

50、to report the painting, and they are not required to do so.-The $10,000 gift must be conveyed to an outside beneficiary and is reported by the not-for-profit entity as a liability.40. (continued) b.Statement of Financial PositionAssetsa. Cash$738,000b. Pledge Receivable81,000c. Equipment$300,000d. A

51、ccumulated Depreciation(20,000)280,000Total Assets$1,099,000Liabilitiese. Salaries Payable$5,000f. Notes Payable250,000g. Donated Amount Due to SeparateEntity10,000$265,000Net Assets (see Statement of Activities) Unrestricted$515,900Temporarily Restricted218,100Permanently Restricted100,000834.000Ex

52、planation of Balances:Cash. The final balance is the beginning cash figure of $700,000 plus $210,000 in contributions, less $80,000 for salaries, less $50,000 for equipment, plus $30,000 in membership dues, plus $10,000 contribution that must be conveyed to a separate entity, plus $13,000 investment

53、 income, less $2,000 paid for advertising, and less $93,000 paid for supplies.Pledges receivable. The amount to be reported is the present value as of the end of the year (the original $78,000 plus the $3,000 interest recognized for the period).Equipment. Entity acquired $300,000 of equipment during

54、 the year.Accumulated Depreciation. The $20,000 amount of depreciation recorded for this initial year of ownership.Salaries Payable. The amount owed to employees as of the end of the year.Notes Payable. The liability incurred in acquiring equipment.Donated Amount Due to Separate Entity. Amount given

55、 by a donor that must be conveyed to a separate organization. The amount must be shown as a liability since no mention was made that the entity here had variance powers that would allow it to change the beneficiary.41.(50 Minutes) (Effect of various transactions on unrestricted and restricted net as

56、sets)InvestmentsInternally Restricted 160,000Cash 160,000Cash 80,000Contributed Support Permanently Restricted Net Assets80,000Inventory of Medicines 25,000Cash 25,000ReclassificationTemporarily Restricted Net Assets 25,000Reclassification-UnrestrictedNet Assets 25,000Accounts ReceivablePatients 120

57、,000Accounts receivableThird-Party Payors 480,000Patient service revenues 600,000Depreciation Expense 38,000Accumulated Depreciation 38,000Cash 15,000Interest Revenue一 Unrestricted Net Assets (internally restricted)15,000Provision for Bad Debts 20,000Allowance for UncollectibleAccounts 20,000Contrac

58、tual Adjustment 30,000Allowance for Reduced Charges 30,000(continued)Supplies Expense 25,000Inventory of Medicines 25,000Cash 172,000InvestmentsInternally Restricted 160,000Gain on Sale of Investments-Unrestricted Net Assets 12,000Equipment 212,000Cash ($172,000 + $15,000 + $25,000) 212,000Reclassif

59、icationTemporarily Restricted Net Assets 25,000Reclassification-UnrestrictedNet Assets 25,000Cash 12,600Pledges Receivable (presentvalue) 98,000Allowance for Uncollectible Pledges 9,000Contributed SupportUnrestrictedNet Assets 12,600Contributed Support-Temporarily Restricted Net Assets 89,00041. (co

60、ntinued)a.Calculation of Chanaes in Net AssetsUnrestricted Net Assets No changeTemporarily Restricted Net AssetsPermanently Restricted Net Assetsb.c.d.e.f.gh.i.i.Donation一 Income for SalariesStipulation MetReclassification25,000PatientServices600,000Depreciation(38,000)Interest15,000Bad Debts(20,000