GAAP for Nonprofits

1. Introduction
2. ASU No. 2016-14 00:02:10
3. Summary of Changes From ASU 2016-14 00:03:00
4. Summary of Changes From ASU 2016-14 Cont’d 00:05:55
5. Summary of Changes From ASU 2016-14 Cont’d 00:09:33
6. Summary of Changes From ASU 2016-14 Cont’d 00:11:27
7. Summary of Changes From ASU 2016-14 Cont’d 00:12:29
8. Other Changes: Grants, Contributions, Revenue - ASC 606’s Five-Step Model 00:13:34
9. Other Changes: Grants, Contributions, Revenue - Clarify The Boundary 00:16:10
10. Other Changes: Grants, Contributions, Revenue - Conditional versus Unconditional 00:18:19
11. ASU 2020-07: Contributed Nonfinancial Assets - Requires Separate Presentation 00:19:43
12. ASU 2020-07: Contributed Nonfinancial Assets - Mandates Disaggregation 00:20:32
13. New Terminology - Board-Designated Endowment Fund 00:21:17
14. New Terminology - Endowment Fund 00:22:03
15. New Terminology - Donor-Imposed Restriction 00:22:22
16. New Terminology - Donor-Restricted Support 00:24:14
17. New Terminology - Natural Expense Classification 00:25:07
18. New Terminology - Functional Expense Classification 00:25:42
19. New Terminology - Programmatic Investing 00:26:20
20. New Terminology - Underwater Endowment Fund 00:27:04
21. Three Becomes Two 00:28:46
22. Reasons ? 00:30:00
23. Required Disclosures 00:31:31
24. Implied Time Restrictions - 958-205-45-6 (OLD) 00:32:39
25. Implied Time Restrictions - 958-205-45-6 (NEW) 00:36:50
26. Implied Time Restrictions- 958-205-45-9 00:37:32
27. Implied Time Restrictions - 958-205-45-12 00:38:03
28. Underwater Endowment Funds 00:39:28
29. Underwater Endowment Funds - Old Approach 00:40:37
30. Underwater Endowment Funds - New Approach 00:42:01
31. Required Disclosures 00:43:07
32. The Problem: Hard To Assess Liquidity Due To Donor-Imposed Restrictions 00:44:40
33. The Solution:  More Disclosure About Liquidity 00:45:53
34. New Details Required - Qualitative Information 00:46:12
35. New Details Required - Use Of Classified Balance Sheet 00:47:36
36. Example Note - Management Of Liquidity 00:51:39
37. Example Note - Availability Of Assets To Meet Cash Needs 00:53:53
38. Cash Flow Statement Preparation 00:57:09
39. Cash Flow Statement Review 00:58:18
40. Cash Flow Statement Review Cont’d 01:01:01:36
41. Direct vs. Indirect Method 01:03:04
42. Final Rule 01:05:15
43. Optional Operating Measure 01:07:11
44.  New Standard Is Neutral 01:12:05
45. Investment Return And Expenses - 958-225-45-14  01:13:23
46. Investment Return And Expenses - 958-225-45-14 Cont’d 01:13:30
47. Investment Return And Expenses - 958-225-45-14A 01:14:16
48. Investment Return And Expenses - 925-225-45-14B 01:17:47
49. Functional Expense Reporting 01:19:41
50. Rationale For Functional Expense Reporting 01:20:25
51. Functional Expenses 01:22:28
52. Changes To Functional Expense Reporting - Natural/Functional Classification 01:
53. Changes To Functional Expense Reporting - Analysis Of Expense Classification In One Location 01:
54. Changes To Functional Expense Reporting - Program Services 01:31:40
55. Changes To Functional Expense Reporting - Management And General Activities 01:32:05
56. Changes To Functional Expense Reporting - Management And General Activities Cont’d 01:32:51
57. Changes To Functional Expense Reporting - Enhanced Disclosures  01:33:46
58. Changes To Functional Expense Reporting - Disclosure Statement 01:35:04
59. American Cancer Society 01:36:21
60. American Cancer Society - Balance Sheets 01:36:39
61. American Cancer Society - Statement Of Activities 01:3:09
62. American Cancer Society  - Financial Statement 01:38:59
63. American Cancer Society  - Statement of Functional Expenses 01:39:41
64. Wrap-Up 01:40:27
65. Presentation Closing 01:41:38

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  Chuck Borek

  Chuck Borek is a practicing attorney and founder of  the Borek Group, LLC. Chuck is also a CPA, and his background includes  five years as a partner in a public accounting firm. He received his law degree and MBA summa cum laude from the University of Baltimore in 1993, where he was editor [...]

  View Full Profile

• Accounting (ACCG) 00:41:42
• Asset 00:03:15, 00:09:49, 00:20:10, 00:24:02, 00:29:01, 00:33:34, 00:41:03, 00:53:52, 01:14:16, 01:37:00
• ASU No. 2016-14 00:03:00, 00:12:36
• Balance Sheet (BS) 00:03:41, 00:32:18, 00:41:10, 00:54:13, 01:3
• Board-Designated Endowment Fund 00:21:33
• Cash flow (CF) 00:57:09 01:03:13
• Cash Flow Statement 00:57:43, 01:01:49
• Cost 00:15:28
• Cost Allocation 01:32:11
• Depreciation 00:25:40
• Direct Method 00:58:49,  01:03:06
• Donor-Imposed Restriction 00:23:29
• Endowment Fund 00:22:03, 00:27:14
• Expenditure 00:09:53, 00:54:17, 01:26:51
• Expenditure 00:46:36
• Expense 00:05:58, 00:11:53, 00:25:27,  01:07:29, 01:13:52, 
• Expense Report 01:19:42, 01:22:03
• FASB - Financial Accounting Standards Board 00:44:44
• Financial Statement 00:08:40, 00:41:36, 00:46:06, 01:36:26
• Functional Expense Classification 00:06:19
• Functional Expenses 01:40:21
• Generally Accepted Accounting Principles (GAAP) 00:00:05
• Income Statement 01:38:18
• Indirect Method 00:48:52 01:03:25
• Liability 00:03:43
• Natural Expense Classification 00:25:10
• Net Asset 00:03:52, 00:05:47, 00:29:15, 00:45:18, 00:59:58, 01:37:21
• Nonprofit 00:02:54, 00:07:31, 00:16:55, 00:37:38, 00:44:52, 00:54:09, 01:04:43, 01:20:08, 01:27:39, 01:36:28
• Programmatic Investing 00:26:20
• Reconcilitation 01:03:14
• Revenue 01:07:29
• Transactions 00:16:33
• Underwater Endowment Fund 00:12:39, 00:27:05, 00:39:28
• UPMIFA - Uniform Prudent Management of Institutional Funds Act 00:30:09

ASU No. 2016-14: ASU 2016-14 requires information on functional expenses to be reported in one location, which may be within the Statement of Activities, in the notes to the financial statements, or presented as a separate Statement of Functional Expenses.

Accounting (ACCG): A systematic way of recording and reporting financial transactions for a business or organization.

Asset: Property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies.

Balance Sheet (BS): A financial report that summarizes a company's assets (what it owns), liabilities (what it owes) and owner or shareholder equity at a given time.

Board-Designated Endowment Fund: A board-designated endowment fund is created when a governing board designates or earmarks a portion of its net assets without donor restrictions to be invested for a generally long, but not necessarily specified, period of time.

Cash Flow (CF): The revenue or expense expected to be generated through business activities (sales, manufacturing, etc.) over a period of time.

Cash Flow Statement: In financial accounting, a cash flow statement, also known as statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.

Cost Allocation: Cost allocation is the process of identifying, aggregating, and assigning costs to cost objects. A cost object is any activity or item for which you want to separately measure costs. Examples of cost objects are a product, a research project, a customer, a sales region, and a department.

Depreciation: A reduction in the value of an asset with the passage of time, due in particular to wear and tear.

Direct Method: Direct cash flow is an accounting method that creates a detailed cash flow statement showing the cash changes over an accounting period. The method lists every transaction on the company's cash flow statement. It also identifies changes in cash payments and company activity receipts.

Donor-Imposed Restriction: Donor-imposed restrictions are a way for the donor to tell you what to spend their money on. Donor-imposed restrictions can be either explicit or implied.

Endowment Fund: An endowment fund, quite simply, is money set aside (invested) to earn revenue to fund some type of charitable activity. Unlike a typical investment fund, the beneficiary of an endowment fund is a nonprofit organization instead of individual investors.

Expenditure: An expenditure is money spent on something. Expenditure is often used when people are talking about budgets.

Expense: Offset (an item of expenditure) as an expense against taxable income.

Expense Report: A report that tracks expenses incurred during the course of performing necessary job functions. Examples include charges for gas, meals, parking or lodging. If your employees spend a lot of money in cash, you need to make sure you have them list these expenditures on an expense report form.

FASB - Financial Accounting Standards Board: The Financial Accounting Standards Board is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles within the United States in the public's interest.

Financial Statement: Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. ... A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time.

Fixed Assets: Assets that are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment.

Functional Expense Classification: Functional expense classification refers to the purpose for which the expenses were incurred, such as program activities and support services. The SFE reports expenses by their function (programs, management and general, fundraising) and by the nature or type of expense (salaries, rent).

Functional Expenses: Expenses are classified according to the purpose for which the cost is incurred:

Generally Accepted Accounting Principles (GAAP): A set of rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. Following these rules is especially critical for all publicly traded companies.

Income Statement: One of the three primary financial statements used to assess a company's performance and financial position (the two others being the balance sheet and the cash flow statement). The income statement summarizes the revenues and expenses generated by the company over the entire reporting period. (investinganswers.com)

Indirect Method: The indirect cash flow method calculates cash flow by adjusting net income with differences from noncash transactions. It starts with a business's net income and then lists cash flows, both received and paid, for various activities (i.e., the three cash flow categories: operating, investing, and financing).

Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

Natural Expense Classification: This is a method of grouping expenses according to the kinds of economic benefits received in incurring those expenses. Examples of natural expense classifications include salaries and wages, supplies interest expense, rent and utilities, and depreciation.

Net Asset: Net assets is defined as the total assets of an entity, minus its total liabilities. The amount of net assets exactly matches the stockholders' equity of a business. In a nonprofit entity, net assets are subdivided into unrestricted and restricted net assets.

Nonprofit Corporation: A nonprofit organization, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is an organization dedicated to furthering a particular social cause or advocating for a shared point of view.

Programmatic Investing: Programmatic investments are a means of leveraging philanthropic dollars. Some NFPs maintain formal programs that make programmatic investments on an annual basis. Others make programmatic investments when the opportunity presents itself. Loans are the most common programmatic investment.

Reconciliation: Payroll reconciliation is when you compare your payroll register with the amount you're planning to pay out to your employees to confirm those numbers match. The simplest way to think about it is double-checking your math to ensure that you pay your employees correctly. Payroll reconciliation should happen frequently.

Revenue: In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees.

UPMIFA - Uniform Prudent Management of Institutional Funds Act: The Uniform Prudent Management of Institutional Funds Act (UPMIFA) is a uniform act that provides guidance on investment decisions and endowment expenditures for nonprofit and charitable organizations. As of 2012 UPMIFA is the law in 49 states, the District of Columbia, and the U.S. Virgin Islands.

Underwater Endowment Fund: An underwater endowment, as defined by the FASB, is a donor-restricted endowment fund for which the fair value of the fund at the reporting date is less than either the original gift amount or the amount required to be maintained by the donor or by law that extends donor restrictions.