Not For Profit Accounting Paper 11

(b) The requirement is to determine what amount should be reported as contribution revenue in the 2012 statement of activities. The $2,000 restricted for meals is considered contribution revenue even though it is restricted. The amount received over the fair market value of the subscriptions is considered to be contribution revenue, which is $500 ($1,500 – $1,000). The $10,000 to be used upon completion of a new playroom is not part of 2012 revenue contribution because a condition, completion of a new playroom, has not been fulfilled. The money is only available upon completion, and the building is not complete in 2012. What is included in contribution revenue is $2,500 ($2,000 + $500).

(c) Gifts of long-lived assets should be reported as unrestricted support if the organization has an accounting policy which does not imply a time restriction on such gifts.

(b) A conditional promise to give is considered unconditional if the possibility that the condition will not be met is remote.

(b) The requirement is to determine how much of the $150 from a donor in exchange for theater tickets and an acknowledgment is considered contribution revenue. Contribution revenue is the amount given above the fair market value. The amount given, $150, is $50 more than fair market value of the tickets, which is $100.

(b) Expiration of donor-imposed restrictions that simultaneously increase one class of net assets and decrease another should be reported as reclassifications on the statement of activities. Reclassifications are reported as “net assets released from restrictions.” When the time restriction on the donation expired in 2011, unrestricted net assets increased while temporarily restricted net assets decreased. The spending of the donation on fund-raising should be reported as an expense, which is a deduction from unrestricted net assets. Therefore, the net effect of the reclassification and the use of the donation is zero on unrestricted net assets. However, the reclassification decreased temporarily restricted net assets for 2011.

(c) Reclassifications result from expirations of donorimposed restrictions. The donor-imposed restrictions may be either time or purpose related. When a donor-imposed condition is satisfied, the conditional promise to give assets becomes unconditional, and there is an increase in the appropriate classification of net assets, depending on the restrictions placed upon the assets by the donors. However, this increase is reported as either revenue or support at the time the promise becomes unconditional

(b) Interest earned on board-designated investments is reported as unrestricted revenue. When the governing board of a not-for-profit organization places limitations on assets, they are designating the use of unrestricted net assets. Therefore, income earned on board-designated investments represents an increase in unrestricted net assets. Unconditional promises to give are reported in the period the pledges are made, not in the period of cash collection. However, since the contributions will not be received until 2013, the contributions should be reported as an increase in temporarily restricted net assets on the statement of activities for 2012 because of this time restriction.

(d) Contributed services should be recognized if either of the following conditions is met: (1) the services create or enhance nonfinancial assets, or (2) the services require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.

(d) Donations of works of art for which the donor stipulated a specified purpose and which are to be preserved and not be sold, represent permanently restricted net assets. Since the museum’s policy is to capitalize all donations of art, Ms. Billingsley’s donation would be reported as an increase in permanently restricted net assets on the statement of activities.

(a) The restricted donation of the voluntary health and welfare organization is reported as a reclassification on the statement of activities for 2012. The net effect of the reclassification and the recognition of the expense is zero. The reclassification resulting from the expiration of the donor-imposed restriction increases unrestricted net assets; however, the expense resulting from using the funds for public health education is subtracted from this increase, causing no effect on unrestricted net assets. The interest and dividends earned on the term endowments are unrestricted, and should be reported as an increase in unrestricted revenue for 2012. Since no expenses have been incurred from the use of the investment income for 2012, the net effect is an increase in unrestricted net assets for 2012.