Not-For-Profit Organizations Essay

Executive Summaryno(prenominal)-For-Profit organizations are fundamentally different than for-profit, private field businesses in that they do not have shareholders, their mission logical arguments are cogitate on furthering a cause rather than just increasing lucrativeness and most no(prenominal)-For-Profits earn the majority of their revenue through donor contributions. As a result, no-For-Profit agreements operate under different reporting requirements than for-profit businesses. In give to go forth proper accounting for the numerous activities undertaken by a zero(prenominal)-For-Profit Organization in a given year, it is imperative that one understand the both fiscal accounting standards that affect Not-For-Profit organizations the most Statements of Financial Accounting Standards (SFAS) 116 and 117 which provide guidance on donor contributions and the presentation of the pecuniary statements.The objective of this compact is to provide a high-level overview 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 accepted and contributions made to all organizations with fiscal years beginning after declination 15, 1994. Contributions are defined by SFAS No. 116 as voluntary transfers in which the donor does not receive any value in return. presenter contributions may include the following resourcesCash,Marketable securitiesProperty and equipmentUtilities and SuppliesIntangible assets much(prenominal) as intellectual propertyProfessional serveSFAS 116 requires that all contributions and haughty promises to donate in the forthcoming, known as promises, are recognized as revenues at fair value in the catch 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 upshot. supererogatoryly, con tributions made and received are also recognized at as expenses upon receipt at fair value.The Statement of Financial Accounting Standards No. 116 also requires organizations to identify those contributions that contain donor-imposed restrictions and the timeframe or requirements for meeting these donor-imposed restrictions. According to SFAS No. 116, organizations must classify contributions into one of the following categories based on the origination or absence of donor imposed stipulationsPermanently Restricted crystallize AssetsTemporarily Restricted Net AssetsUn certified Net AssetsThose assets that are restricted by a donor imposed stipulation of time, a finicky purpose or program, or the occurrence of a future event must be set aside and cannot be expended until the restriction has discontinue 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 tha t it provides standards for the presentation 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 put up the following financial statements on an annual basis A statement of financial range (balance sheet)A statement of activities (income statement)A statement of bullion flowsIn the statement of financial plant, SFAS No. 117 requires that the Not-For-Profit organization provide amounts for the summate 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 compulsory to report to the financial statement users the transactions which 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, perceivable and comparable information in order to assess the financial position of the Not-For-Profit organization over the past fiscal year and going away into the future.