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

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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.A. 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.B. Re

4、porting 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.1. Many private not-for-profit entities receive a significant amount of their financial

5、 resources from contributions rather than from revenues or capital investments.2. A significant amount of the financial resources given to a private not-for-profit entity include donor-imposed restrictions.3. No single indicator of success is present in the financial reporting. No number such as net

6、 income provides a means for evaluation as it does with a for-profit business.I. FASB has established the following financial statements for private not-for-profit entities.A. Statement of Financial Position reports assets, liabilities, and net assets.B. Statement of Activities reports revenues, exp

7、enses, gains, and losses.C. 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

8、and raise funds).II. For reporting purposes, all economic resources held by a private not-for-profit entity are classified within one of three categories.A. Unrestricted net assets indicates the amount of an entitys resources that are not subject to external donor restrictions. Entity officials can

9、make whatever use they wish of these assets.B. 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 unres

10、tricted net assets. At that time, on 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 enti

11、ty does not expect to be paid. In addition, 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.)13 . C (Charity care is not recorded by a not-for-profit health care entity because the entity provi

12、ded services for individuals with no ability 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.

13、Unless the charity was given variance powers 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.)14 .B (In this way, no financial benefit accrues

14、 to the charity from the sale of the artifact.)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 reclassific

15、ation was made. The $80,000 was properly spent on the salaries for the teachers and must be reclassified from temporarily restricted net assets to unrestricted net assets when the expense is recognized.)17. A (The key factor here is that YZ is expected to be predominantly supported by contributions.

16、 Thus, future exchange revenues will likely be 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

17、 on the statement of activities. No goodwill is 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 liabilit

18、ies is retained. The $300,000 book value for BCs 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 ac

19、quisition value of Northeast ($980,000) and the fair value of the two recognized assets ($950,000 or $150,000 plus $800,000) is recognized as goodwill.)18. DC19. CC (The charity care work should not be recorded in any way because the entity has no expectation of collection. That reduction drops the

20、reported amount for patient service revenue to $600,000. 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.)20. B (Use of the mo

21、ney is limited to the donors specified purpose.)B (This donated service meets the rules for recognition. The expense and the contributed support are both reported.)21. A (Form 990 is the annual informational form that most tax-exempt organizations are required to file by the IRS.)A (As an educationa

22、l institution, Belwood University will qualify as a 501(c)(3) tax-exempt organization.)22. 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

23、 (The gift was not specifically designated for this particular family so the entity recognizes both the revenue and expense.)23. A (The work performed requires a specialized skill that would otherwise have to be acquired by the not-for-profit entity.)B24. A (The fundraising costs and administrative

24、salaries are supporting service expenses.)B25. D(10 minutes) (Reporting of various 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 worker

25、s) = the fair value of the services contributed causes an increase in unrestricted 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

26、 in unrestricted net assets Charges to patients = increase in unrestricted net 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.Provisio

27、n for bad debts = amount is anticipated and this provision for bad debts is reported as a direct reduction in patient service revenues to arrive at net patient service revenues.26. (15 Minutes) (Series of questions about the reporting of health care entities)A third-party payor is an entity (such as

28、 Medicare or an insurance company) that pays a portion, or all, of a patients medical 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 dec

29、ades to develop adequate accounting principles and reliable accounting systems.a. A contractual 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. T

30、hese outside parties often establish contractual arrangements whereby the health care 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

31、 entity because the amount that eventually will be collected is not always known. Thus, 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 redu

32、ce the net reported revenue to the amount anticipated as being collected.b. At the time that 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 unrestrict

33、ed net assets. If the asset has a finite life, officials can assume a time restriction on 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 depreciati

34、on expense.Donated services are recorded as a contribution increasing unrestricted net assets 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 special

35、ized skills, are provided by individuals possessing those skills, and would need to be purchased 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.27. (6 Minutes) (Reporting of var

36、ious accounts by a not-for-profit entity)Only $7.6 million is reported as patient service revenues. 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 pati

37、ent service revenue figure to report of $6.8 million.The supplies are recorded at their $4,000 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.28. a). (8 Minutes) (Recording do

38、nations by a voluntary health and welfare entity)Pledges $600,000Anticipated Amount Deemed to be 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 2015Contribute

39、d Support (40% of above)$204.000b). Both contributed support and salary expense are recognized as $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

40、 private not-for-profit entity)40. (continued)a.Statement of ActivitiesUnrestrictedTemporarily RestrictedPermanently RestrictedNet AssetsNet AssetsNet AssetsPublic Supporta. Contributions$210,000$78,000b. ContributionInterest3,000Revenuec. Membership dues30,000d. Investment income3,9009,100e.Net ass

41、ets released fromrestriction72,000(72,000)Total Public Support andRevenue$315,900$18,100ExpensesProgram 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)T

42、otal(34,000)-Fundraisingk. Salaries(26,500)I. Advertising(2,000)m. Depreciation(2,000)Total(30,500)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

43、 balances to be reported are the unrestricted gifts ($210,000) plus present value of unrestricted pledge ($78,000). Pledge is viewed as temporarily restricted because it will not be collected for three years.a. Contribution-Interest. The pledge is recorded at its present value of $78,000. Interest t

44、hat is recognized to raise the balance to the pledge amount is reported as a contribution.b. Membership 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.c. Investment income. Although this

45、income ($13,000) is earned on permanently restricted net assets, 70 percent is shown as temporarily restricted because the donor has specified that it must be spent on advertising. The remaining 30 percent is unrestricted.d. Net assets released from restriction. Three restricted amounts were properl

46、y spent during the period: $20,000 for salaries, $50,000 for equipment, and $2,000 for advertising. No implied time restriction was assumed for the equipment so the entire reclassification was made immediately.e. Salaries. During the period, $24,000 in salaries were paid (30 percent of $80,000 was a

47、ssigned here) and another $2,500 was owed at the end of the year (50 percent of year-end accrual).f. Depreciation. 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.g. Supplies. A total o

48、f $93,000 was acquired and used during the year.h. Salaries. Administrative salaries amounted to $32,000 for the year (40 percent of overall total).i. Depreciation. Of the total for the period, 10 percent was allocated to general and administrative expenses.j. 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 year-end accrual).k. Advertising. Only $2,000 in advertising cos