2. © 2008 Clarence Byrd Inc. 2  Not-for-profit organizations normally do not have a transferable ownership interest.

3. © 2008 Clarence Byrd Inc. 3  Not-for-profit organizations are operated exclusively for social, educational, professional, religious, health, charitable, or other not-for-profit purposes.

4. © 2008 Clarence Byrd Inc. 4  Section 4400 – Financial Statement Presentation  Section 4410 – Revenue Recognition  Section 4420 – Contributions Receivable  Section 4430 – Capital Assets  Section 4440 – Collections Held  Section 4450 – Controlled and Related Entities  Section 4460 – Related Party Transactions

5. © 2008 Clarence Byrd Inc. 5  Paragraph 4400.02(c) Fund accounting comprises the collective accounting procedures resulting in a self-balancing set of accounts for each fund established by legal, contractual or voluntary actions of an organization. Elements of a fund can include assets, liabilities, net assets, revenues and expenses (and gains and losses, where appropriate). Fund accounting involves an accounting segregation, although not necessarily a physical segregation, of resources.

6. © 2008 Clarence Byrd Inc. 6  Paragraph 4410.10 An organization should recognize contributions in accordance with either: › (a) the deferral method; or › (b) the restricted fund method. (April, 1997)

7. © 2008 Clarence Byrd Inc. 7  Under the deferral method of accounting for contributions, restricted contributions related to expenses of future periods are deferred and recognized as revenue in the period in which the related expenses are incurred. Endowment contributions are reported as direct increases in net assets. All other contributions are reported as revenue of the current period. Organizations that use fund accounting in their financial statements without following the restricted fund method would account for contributions under the deferral method.

8. © 2008 Clarence Byrd Inc. 8  The restricted fund method of accounting for contributions is a specialized type of fund accounting which involves the reporting of details of financial statement elements by fund in such a way that the organization reports total general funds, one or more restricted funds, and an endowment fund, if applicable. Reporting of financial statement elements segregated on a basis other than that of use restrictions (e.g., by program or geographic location) does not constitute the restricted fund method.

9. © 2008 Clarence Byrd Inc. 9  A contribution is a non-reciprocal transfer to a not-for-profit organization of cash or other assets or a non-reciprocal settlement or cancellation of its liabilities. Government funding provided to a not-for-profit organization is considered to be a contribution.

10. © 2008 Clarence Byrd Inc. 10  A restricted contribution is a contribution subject to externally imposed stipulations that specify the purpose for which the contributed asset is to be used. A contribution restricted for the purchase of a capital asset or a contribution of the capital asset itself is a type of restricted contribution.

11. © 2008 Clarence Byrd Inc. 11  An endowment contribution is a type of restricted contribution subject to externally imposed stipulations specifying that the resources contributed be maintained permanently, although the constituent assets may change from time to time.

12. © 2008 Clarence Byrd Inc. 12  An unrestricted contribution is a contribution that is neither a restricted contribution nor an endowment contribution.

13. © 2008 Clarence Byrd Inc. 13  Unrestricted Contributions These contributions can be recognized in the period in which they are received or become receivable.

14. © 2008 Clarence Byrd Inc. 14  Restricted Contributions The basic idea here is that the recognition of restricted contributions must be deferred until the restriction is fulfilled. The actual implementation of this will depend on the type of restriction that is involved:

15. © 2008 Clarence Byrd Inc. 15  Expenses Of Current Period If the restriction is for current period expenses, the contributions should be recognized in the current period.  Expenses Of Future Periods In this case, the contributions should be recognized in the same period or periods in which the related expenses are made.

16. © 2008 Clarence Byrd Inc. 16  Purchase Of Capital Assets If the restriction is based on acquiring capital assets that will be amortized, the contributions should be recognized on the same basis that the amortization expense is recorded. Alternatively, if the contributions are restricted to the acquisition of non-amortizable assets, they should be recorded as direct increases in net assets, without being disclosed as a revenue in the Statement Of Operations.

17. © 2008 Clarence Byrd Inc. 17  Endowment Contributions These contributions should be recorded as direct increases in net assets during the current period. They should not be included in the revenues disclosed in the Statement Of Operations.

18. © 2008 Clarence Byrd Inc. 18  Restricted Contributions The treatment here will depend on whether a restricted fund is being used for the particular type of restriction that is involved.

19. © 2008 Clarence Byrd Inc. 19  Contributions With A Corresponding Restricted Fund In this case, the restricted contributions should be recognized as a revenue of the related fund in the period in which they are received or become receivable.

20. © 2008 Clarence Byrd Inc. 20  Contributions With No Corresponding Restricted Fund These contributions should be recognized on the same basis as they would be under the deferral method (e.g., if they are restricted to purchases of amortizable capital assets, they should be recognized as a revenue on the same basis as the amortization expense is recorded).

21. © 2008 Clarence Byrd Inc. 21  Endowment Contributions These contributions should be recognized as a revenue of the endowment fund in the period in which they are received or become receivable. Note the difference here from the treatment of these amounts under the deferral method. Under the deferral method, endowment contributions are not recorded as revenues, but as direct increases in the endowment fund assets.

22. © 2008 Clarence Byrd Inc. 22  Paragraph 4420.03 A contribution receivable should be recognized as an asset when it meets the following criteria: › the amount to be received can be reasonably estimated; and › ultimate collection is reasonably assured.

23. © 2008 Clarence Byrd Inc. 23  Criteria For Recognition › Contributed goods and services would only be recognized if they would have otherwise been purchased. This is likely to eliminate the recognition of a significant portion of the voluntary services received.

24. © 2008 Clarence Byrd Inc. 24  Paragraph 4410.52 Deferred contributions balances should be presented in the statement of financial position outside net assets.  Paragraph 4410.53 An organization should disclose the nature and amount of changes in deferred contributions balances for the period.

25. © 2008 Clarence Byrd Inc. 25  Paragraph 4410.73 When restricted contributions are recognized in the general fund in accordance with paragraph 4410.65, any deferred contributions balances should be presented in the statement of financial position outside net assets.  Paragraph 4410.74 When restricted contributions are recognized in the general fund in accordance with paragraph 4410.65, the nature and amount of changes in deferred contributions balances for the period should be disclosed.

26. © 2008 Clarence Byrd Inc. 26  Traditional practice excluded from financial statements  Section 4430 requires the usual capitalization and amortization rules  Two important exceptions

27. © 2008 Clarence Byrd Inc. 27  Paragraph 4430.03 Organizations may limit the application of this Section to the Recommendation in paragraph 4430.40 if the average of annual revenues recognized in the statement of operations for the current and preceding period of the organization and any entities it controls is less than $500,000. When an organization reports some of its revenues net of related expenses, gross revenues would be used for purposes of this calculation.

28. © 2008 Clarence Byrd Inc. 28  Paragraph 4430.06 A capital asset should be recorded on the statement of financial position at cost. For a contributed capital asset, cost is considered to be fair value at the date of contribution. In unusual circumstances when fair value cannot be reasonably determined, the capital asset should be recorded at nominal value.

29. © 2008 Clarence Byrd Inc. 29  Paragraph 4430.16 The cost, less any residual value, of a capital asset with a limited life should be amortized over its useful life in a rational and systematic manner appropriate to its nature and use by the organization. Amortization should be recognized as an expense in the organization’s statement of operations.  Paragraph 4430.23 The amortization method and the estimate of the useful life of a capital asset should be reviewed on a regular basis.