Download - 2013 AICPA Not-for-Profit A&A Guide - · PDF file2013 AICPA Not‐for‐Profit A&A Guide ... • Chapter 2 – General auditing considerations • Chapter 3 – Financial ... • Chapter

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MikeWolfe,CPAPartnerBKD,LLP
[email protected]
Wednesday,January15,2014|10 11a.m.CentralTime
2013AICPANotforProfitA&AGuide
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OverhaulofAICPAAudit&AccountingGuideTitledNotforProfitEntities
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BACKGROUND
FocusofNFPGuide Notforprofitentities GAAPbasisfinancialstatements Auditedfinancialstatements
Firstrevision,otherthanannualconformingchanges,sinceGuidewasreleasedin1996
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SOURCEOFNEWGUIDECONTENT
Questionsidentifiedinpractice AuthoritativeguidancefromFASBCodification NonauthoritativeguidancefromFinRECconclusions IncorporatedrelevantnonauthoritativeAICPAliterature
NFPrelatedTechnicalQuestions&Answers(TIS) AICPAWhitePaperonFairValueMeasurement AlternativeInvestmentsTIS
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AUTHORITATIVESTATUSOFAICPAGUIDES
Accounting&financialreporting BasisofaccountingcontentisfromGAAP,butGuidesprovideadditionalexplanation&practicalguidance
Auditing Auditingguidanceconsideredinterpretivepublication
underAUCsection200,OverallObjectivesoftheIndependentAuditor&theConductofanAuditinAccordancewithGenerallyAcceptedAuditingStandards
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TABLEOFCONTENTS
Chapter1 Introduction Chapter2 Generalauditingconsiderations Chapter3 Financialstatements,reportingentity &generalfinancialreportingmatters Chapter4 Cash,cashequivalents &investments Chapter5 Contributionsreceived&agencytransactions Chapter6 Splitinterestagreements&beneficialinterestsintrusts Chapter7 Otherassets Chapter8 Programmaticinvestments Chapter9 Property&equipment Chapter10 Debt&otherliabilities Chapter11 Netassets&reclassificationsofnetassets Chapter12 Revenues&receivablesfromexchangetransactions Chapter13 Expenses,gains &losses Chapter14 Reportsofindependentauditors Chapter15 Tax&regulatoryconsiderations Chapter16 Fundaccounting Appendices
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CHAPTER3 FINANCIALSTATEMENTS,REPORTINGENTITY&GENERALFINANCIALREPORTINGMATTERS
Significantly expandedguidanceoninterestsinrelatedentities Summarychartofexamplesthatreferencetosections
ofbothGuide&FASBASCo NFPentitieso Forprofitentitieso Specialpurposeleasingentities
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EXCERPTFROMEXHIBIT3 2
Relationship FinancialAccountingStandardsBoard(FASB)AccountingStandardsCodification(ASC)Reference
DiscussioninThisChapter
ReportingentitycontrolsanotherNFPthroughmajorityvotinginterestinitsboard&haseconomicinterestinthatotherentity
UseguidanceinFASBASC958810253
Paragraphs3.67.69
ReportingentitycontrolsNFPthroughformotherthanmajority ownership,solecorporatemembershipormajorityvotinginterestinboardofotherentity&haseconomicinterestinthatotherentity
UseguidanceinFASBASC958810254
Paragraph3.70
ReportingentityhascontroloveranotherNFPoreconomicinterest intheother,butnotboth
UseguidanceinFASB ASC958810255
Paragraph3.71
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CHAPTER3 FINANCIALSTATEMENTS,REPORTINGENTITY&GENERALFINANCIALREPORTINGMATTERS
Statementoffunctionalexpenses Required asbasicfinancialstatementforvoluntary
health&welfareentities FinRECencourages presentationbyallNFPsthatare
supportedbygeneralpublico NFPwithcontributionsof20 30percentoftotal
revenuepresumedtobesupportedbygeneralpublic(excludinggovernmentsupport)
o Considerfacts&circumstances&usejudgment
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CHAPTER4 CASH,CASHEQUIVALENTS&INVESTMENTS
Significantly expandedguidanceoncommoninvestmentsbyNFPs Summarychartofexamplesthatreferencesections
ofbothGuide&FASBASC
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EXCERPTFROMEXHIBIT4 1
Relationship FinancialAccountingStandardsBoard(FASB)AccountingStandardsCodification(ASC)Reference
DiscussioninThisChapter
RelationshipswithEntitiesHeldforInvestmentReportingentityowns50percentorlessofcommonvotingstockofinvestee,&reportingentityneither controlsnorcanexercisesignificantinfluenceoverinvesteesoperating&financialpolicies.Stockisequitysecuritythathasreadilydeterminablefairvalue
FASCASC958320351 Paragraph4.17
Reportingentityowns50percentorlessofcommonvotingstockofinvestee,&reportingentityneithercontrolsnorcanexercisesignificantinfluenceoverinvesteesoperating&financialpolicies.Stockdoesnothavereadilydeterminablefairvalue.
FASB ASC95832535 Paragraph4.37
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CHAPTER5 CONTRIBUTIONSRECEIVED&AGENCYTRANSACTIONS
ReceiptofresourcesbyNFPcontributionorexchangetransaction? Flowchart(Table5 1) Whenelementsofbotharepresent,divide
transactionintwo,measuringexchangefirst Examples
Membershipdues Grants
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Membershipdues Isvaluereceivedbymembercommensuratewithduespaid? Oftenelementsofbothcontribution&exchange
o Measureexchange portionfirst&recognizeasrevenueastheearningsprocessiscompleted
o Remainderiscontribution,recognizeasrevenueuponreceipt Example Aquariumoffersvaryinglevelsofmembership;eachlevelreceivesannualadmission;varyingotherbenefitsdependingonlevel
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Grants UseTable5 1todetermineifgrantiscontributionor
exchangebasedonfacts&circumstances Ifcontribution Considerifanyconditionsexist,
considerdonorrestrictions Ifexchange Determinerevenuerecognition NFPshouldestablishaccountingpolicyforgrantssothey
areaccountedforconsistently Governmentgrants
o Applyaboveguidanceo FASBcontinuingtoevaluate
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Recognition &measurement ofcontributions Contributedfundraisingmaterial,informational
materialoradvertising,includingmediatimeorspace Belowmarketinterestrateloans Administrativecostsofrestrictedcontributions
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Contributedfundraisingmaterial,informationalmaterialoradvertising,includingmediatimeorspace Examples Publicserviceannouncements,radioadvertisingtime,newspaperprintspace
Donatedasset,notdonatedserviceo Recordcontributionevenifassetwouldnottypicallyneedto
bepurchasedifnotprovidedbydonation FinRECrecommends:RecognizecontributionifNFPhasactiveinvolvementindetermining&managingmessage&useofmaterials;otherwisenotcontribution
Applicationexample
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Belowmarketinterestrateloans No orlowinterestloanoffundsiscontribution toNFP Recordcontributionrevenue&interestexpenseforfair
valueofcontributiono Fairvaluetypicallyestimatedatdifferencebetween
marketrateinterest&actualinterest Relatedpartystatusdoesntimpactrecording Recognitionofcontribution/interestdifferentforlong
termloanvs.dueondemandloan
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LOANS OTHERISSUES
Governmentloansatbelowmarketinterestrates Firstconsiderwhetherloanhascontributoryintent
(contributionvs.exchangetransaction) Followingtypesofloansareexempt frominterest
imputationruleso Transactionswhereinterestratesareaffectedbytaxattributesorlegalrestrictionsprescribedbygovernmentalagency,forexample: Industrialrevenuebonds Taxexemptobligations Governmentguaranteedobligations Incometaxsettlements
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LOANS OTHERISSUES
Forgivableloans Determineifthereiscontributoryintent Determineifconditions oncontributionexist Isforgivenessautomatic,isitdependentonlenders
actionorisitdependentonborrowersactions?
**Seechapter8forcorrespondingaccountingbylenderformakingthiscontribution
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Administrativecostsofrestrictedcontributions Policyofdesignatedcertainpercentageofrestrictedgiftstooffsetcostsofraising&administeringthosegiftso Example Policythat5percentofcontributionsto
scholarshipfundgotopayadministrativecosts;so$95of$100giftisrestrictedforscholarshipfund
Policyneedstobeeffectivelycommunicatedtoorfromdonorprior toreceiptofcontributiono Ifnot,then100percentofgiftshouldbedonorrestricted
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CHAPTER6 SPLITINTERESTAGREEMENTS&BENEFICIALINTERESTINTRUST
BeneficialinterestintrustheldbyanotherentityQuestions WhatifNFPisntnotifiedabouttrustuntilyearsafter
itiscreated? WhatifNFPisunabletoobtaininformationtoverifyit
isnamedasirrevocablebeneficiary? WhatifNFPisunabletoobtaininformationto
measurebeneficialinterest?
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Answers NFPgenerallyneedsthefollowinginformationinorder
torecordbeneficialinterestintrusto Copyofexecutedtrustdocument,statementfrom
trusteeorotherinformationtoverifyexistenceo Sufficientinformationabouttrustinordertovalueit,
e.g.,trustassets,payoutrate/amount,ageoflifebeneficiaries
Makereasonableefforts toobtainnecessaryinformation
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Answers Recognizebeneficialinterestintrust&contribution
revenueinthefirstyearnecessaryinformationbecomesavailable