Not-for-Profit Accounting Made Easy (eBook)

WARREN RUPPEL, CPA, is the Director of Government Services at Marks Paneth & Shron LLP, where he is also a key member of the firm's quality assurance function. He is the author of several Wiley accounting publications, including Not-for-Profit Audit Committee Best Practices, and Wiley GAAP for Governments, as well as CCH's Not-for-Profit Organization Audits. He began his career at KPMG and later joined Deloitte & Touche to specialize in audits of not-for-profit organizations and governments. He has since served as the chief financial officer of an international not-for-profit organization and, most recently, was the assistant comptroller for accounting of the City of New York where he was responsible for the City's accounting and financial reporting. He has also served as chair of the audit commitee of the New York State Society of CPAs.

Preface ix

Chapter 1 Understanding the Basics of Not-for-Profit Accounting 1

What Are Generally Accepted Accounting Principles? 1

Why Is Preparing GAAP Financial Statements Important? 2

Definitions and Examples of Assets, Liabilities, Reve nues, and Expenses Usually Found in Not-for-Profit Organizations' Financial Statements 6

What Is Meant by the Accrual Basis of Accounting? How Does This Differ from the Cash Basis of Ac- counting, and Which Is Better? 36

What Happened to Fund Accounting? 40

Summary 42

Chapter 2 Basic Financial Statements of a Not-for-profit Organization 43

Statement of Financial Position 44

Statement of Activities 46

Statement of Cash Flows 56

Summary 63

Chapter 3 Accounting for Contributions 65

When Should Contributions Be Recorded? 66

Understanding the Impact of Donor Restrictions on the Reporting of Contributions 72

Accounting for Contributed Services 74

Accounting for Other Noncash Contributions 75

Pass-Through Contributions 76

Summary 82

Chapter 4 Accounting for Investments and Financial Instruments 83

Accounting for Investments 84

Accounting and Financial Reporting for Financial Instruments 98

Summary 107

Chapter 5 Accounting for Activities with Joint Costs and Indirect Cost Allocation 109

Accounting for the Costs of Activities that Include Fund-Raising 110

Allocation Methods 117

Indirect Cost Allocation Plans 119

Summary 124

Chapter 6 Affiliated Organizations 125

Affiliated Organizations 126

For-Profit Subsidiaries 135

Related-Party Disclosures 137

Summary 140

Chapter 7 Collections 141

What Is a Collection? 142

Accounting for Collections 143

Summary 146

Chapter 8 Split-Interest Agreements 147

Accounting Fundamentals 148

Revocable Split-Interest Agreements 149

Irrevocable Split-Interest Agreements 150

Examples of Split-Interest Agreements 153

Summary 158

Chapter 9 Accounting for Pension and Other Postretirement Employee Benefit Plans 159

Accounting for Pension Plans 160

Determining Pension Expense 164

Determining Pension Liability 165

Actuarial Assumptions and Calculations 168

Required Disclosures 171

Deferred Compensation Plans 172

Other Postretirement Benefits 173

Disclosures 176

Summary 177

Chapter 10 Lease Accounting Fundamentals 179

Lease Accounting 180

Operating versus Capital Leases 180

Operating Leases 185

Operating Leases with Scheduled Rent Increases 187

Free Rent Periods 188

Capital Leases 189

Summary 193

Chapter 11 Analyzing the Financial Health of Not-for-Profit Organizations 195

Financial Statement Analysis 197

Independent Auditor's Report 197

Comparative Financial Statements 201

Functional Expense Ratios and Other Analyses 203

Budget Considerations in Financial Analysis 213

Relation of the Budget to the Financial Statements 214

Methods of Budgetary Control 216

Summary 218

Chapter 12 Current Developments in Not-for-Profit GAAP 221

Recent FASB Statements 222

Summary 228

Index 229