Not-For-Profit Organizations Essay

Executive Summary nary(prenominal)-For-Profit organizations atomic number 18 fundament every(prenominal)y different than for-profit, head-to-head sector businesses in that they do not have shareholders, their mission records are focused on furthering a cause rather than just increasing profitableness and most Not-For-Profits earn the majority of their revenue through presenter contributions. As a result, Not-For-Profit Organizations operate under different reporting requirements than for-profit businesses. In order to pop the question proper explanation for the numerous activities undertaken by a Not-For-Profit Organization in a given year, it is imperative that one understand the two financial accounting standards that affect Not-For-Profit organizations the most Statements of fiscal Accounting Standards (SFAS) 116 and 117 which provide guidance on donor contributions and the institution of the financial statements.The objective of this summary is to provide a superior over view of the standards and the effect they have on the financial statements of a Not-For-Profit organization. The Statement of Financial Accounting Standards No. 116 establishes the standards for accounting for contributions received and contributions do to all organizations with fiscal age offshoot after December 15, 1994. Contributions are defined by SFAS No. 116 as voluntary transfers in which the donor does not receive any rate in return. Donor contributions may include the following resourcesCash,Marketable securitiesProperty and equipmentUtilities and SuppliesIntangible assets such as intellectual propertyProfessional servicesSFAS 116 requires that all contributions and unconditional promises to donate in the future, known as pledges, are recognized as revenues at fair value in the period in which they are received. Pledges are recognized as soon as the requirements of a pledge are met and it is no longer contingent on a future event. Additionally, contributions made and re ceived are also recognized at as expenses upon receipt at fair value.The Statement of Financial Accounting Standards No. 116 also requires organizations to bring out those contributions that contain donor- compel restrictions and the timeframe or requirements for meeting these donor-imposed restrictions. According to SFAS No. 116, organizations must consort contributions into one of the following categories based on the existence or absence of donor imposed stipulationsPermanently Restricted Net AssetsTemporarily Restricted Net AssetsUnrestricted Net AssetsThose assets that are restricted by a donor imposed stipulation of time, a particular purpose or program, or the occurrence of a future event must be set aside and cannot be expended until the restriction has expired through the satisfaction of the donor stipulation.Statement of Financial Accounting Standards (SFAS) No. 117 is also important in accounting for Not-For-Profit Organizations in that it provides standards for the pre sentation of the financial statements for organizations with fiscal years beginning after December 15, 1994. Overall, this standard requires that the financial statements provide the necessary information for all of the users of Not-For-Profit financial statements. The standard requires that Not-For-Profit Organizations get out the following financial statements on an annual basis A statement of financial slope (balance sheet)A statement of activities (income statement)A statement of cash flowsIn the statement of financial position, SFAS No. 117 requires that theNot-For-Profit organization provide amounts for the total assets, liabilities, and net assets at the end of the fiscal period. Additionally, the statement of financial position must classify the organizations net assets as temporarily restricted, permanently restricted, or unrestricted based on donor imposed stipulations.The statement of activities is required to report to the financial statement users the transactions whi ch caused a change in net assets during the period and the statement of cash flows is must provide a reconciliation of activity between beginning and ending cash balances of the period as either operating activities, financing activities or investing activities. Additional schedules are also required by SFAS No. 117 for special organzations such a voluntary health and wellness organizations that provide unique services related to their cause.Overall, a thorough understanding and application of Statements of Financial Standards No. 116 and 117 allows Not-For-Profit organizations to properly account for their unique activities and provide their financial statement users with relevant, understandable and comparable information in order to assess the financial position of the Not-For-Profit organization over the past fiscal year and going forward into the future.