Academic journal article Journal of Accountancy

Statements 116 and 117 on Contributions to NPOs

Academic journal article Journal of Accountancy

Statements 116 and 117 on Contributions to NPOs

Article excerpt

The Financial Accounting Standards Board issued two companion statements on accounting for not-for-profit organizations (NPOs).

Statement no. 116, Accounting for Contributions Received and Contributions Made, requires contributions received by any organization--including unconditional promises to give--to be recognized at fair value in the period they were received. Conditional promises to give should be recognized in the period when the conditions are substantially met.

Contributions made--including unconditional promises to gives--hould be recognized at fair value as an expense in the period they were made.

Statement no. 116 allows certain exceptions for contributions of services and works of art, historical treasures and similar assets.

Remedying the confusion? According to the FASB, NPOs' reporting practices differ widely, sometimes confusing financial statement users--especially when they try to compare the statements of different NPOs. Statement no. 117, Financial Statements of Not-for-Profit Organizations, is intended to alleviate this confusion by establishing standards that enhance the relevance, understandability and comparability of general purpose external financial statements issued by such organizations.

"Statement no. 117 will help most external users understand not-for-profit financial statements," said Kenneth D. Williams, chairman of the American Institute of CPAs not-for-profit organizations committee and a partner of Coopers & Lybrand in Syracuse, New York.

Still, Williams termed Statement no. 117 "an extremely flexible document" that left open the possibility for inconsistencies in accounting for different types of NPOs and didn't fully address other issues hampering comparability between financial statements--issues FASB eventually will have to address.

"Investments are an area the FASB is going to look at," Williams said. …

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