FASB 116 & 117

Since we talk about them so much in the boot camps, and the govern so much of what we do in keeping our nonprofits books, I thought I would link to the sources and list a quick summary of them. Enjoy!

Statement No. 116 Accounting for Contributions Received and Contributions Made

This Statement establishes accounting standards for contributions and applies to all entities that receive or make contributions. Generally, contributions received, including unconditional promises to give, are recognized as revenues in the period received at their fair values. Contributions made, including unconditional promises to give, are recognized as expenses in the period made at their fair values. Conditional promises to give, whether received or made, are recognized when they become unconditional, that is, when the conditions are substantially met.

This Statement requires not-for-profit organizations to distinguish between contributions received that increase permanently restricted net assets, temporarily restricted net assets, and unrestricted net assets. It also requires recognition of the expiration of donor-imposed restrictions in the period in which the restrictions expire.

Statement No. 117 Financial Statements of Not-for-Profit Organizations

This Statement requires that all not-for-profit organizations provide a statement of financial position, a statement of activities, and a statement of cash flows. It requires reporting amounts for the organization's total assets, liabilities, and net assets in a statement of financial position; reporting the change in an organization's net assets in a statement of activities; and reporting the change in its cash and cash equivalents in a statement of cash flows.

This Statement also requires classification of an organization's net assets and its revenues, expenses, gains, and losses based on the existence or absence of donor-imposed restrictions. It requires that the amounts for each of three classes of net assets-permanently restricted, temporarily restricted, and unrestricted-be displayed in a statement of financial position and that the amounts of change in each of those classes of net assets be displayed in a statement of activities.

This Statement amends FASB Statement No. 95, Statement of Cash Flows, to extend its provisions to not-for-profit organizations and to expand its description of cash flows from financing activities to include certain donor-restricted cash that must be used for long-term purposes. It also requires that voluntary health and welfare organizations provide a statement of functional expenses that reports expenses by both functional and natural classifications.

Are CD's Restricted?

In our ongoing series of Questions From the Boot Camps:

Q:
I was wondering if you would classify Certificates of Deposit as permanently restricted funds or if that is placed in a different category?

A:
CD's are a means of holding the money, like a checking account or a savings account. They are usually for a fixed amount of time, from 30 days on up to years I think. As a vehicle for holding money they would not fall not the category of restricted or unrestricted.

Now the money in the CD is a different story: as an example say you $100,000.00 to do a specific project over two years and you know that you won’t need $60,000.00 of that for the next 12 months. You could take that 60,000.00 and put it into a CD for 12 months and earn a higher rate of interest that it would typically accumulate just sitting in a checking account.

So the CD is not restricted but the money in it might be permanently restricted, unrestricted or temporarily restricted.