Notes on ASNPO Part III: Not-for-Profit Accounting – Capital Assets, Donated Goods/Services, Pledges, and Disclosures

An NPO has average annual revenues of less than $500,000 in the current and preceding period. Which one of the following describes how its tangible capital assets will be accounted for under ASNPO?

A	The NPO must capitalize and amortize its tangible capital assets.
B	The NPO must expense its tangible capital assets.
C	The NPO may record the capital asset as part of inventory.
D	The NPO has a choice of directly expensing or capitalizing and amortizing its tangible capital assets.

The NPO has a choice of directly expensing or capitalizing and amortizing its tangible capital assets.

Which one of the following is the primary difference between a pledge receivable and another receivable of an NPO?

A	Pledges receivable are not legally binding, whereas other receivables generally are legally binding.
B	Pledges receivable are not recognized in the financial statements of NPOs, whereas other receivables are recognized.
C	Pledges receivable cannot be reasonably estimated, whereas other receivables can be reasonably estimated.
D	Pledges receivable have been collected from donors, whereas other receivables have not yet been collected.

Pledges receivable are not legally binding, whereas other receivables generally are legally binding.

Dina’s Bird Sanctuary (DBS) is an NPO that relies on volunteers to care for its birds. DBS is considering recognizing contributed goods and services. Which one of the following statements is true?

A	Volunteer hours should be recorded, even if DBS would not normally pay for them, so that the statement of operations reflects the true cost of caring for the birds.
B	DBS could assign a value to the volunteer hours using a rough estimate.
C	If the volunteer hours are not recorded, they still need to be disclosed in DBS’s financial statements.
D	The volunteer hours would be recorded as revenue and a corresponding direct decrease to net assets of DBS.

If the volunteer hours are not recorded, they still need to be disclosed in DBS’s financial statements.

Sturgis Petting Zoo (Sturgis) is an NPO based in Halifax. Glenn, the new controller, is preparing Sturgis’s financial statements for the year ended December 31, Year 2. Sturgis follows Part III of the Handbook, supplemented by ASPE.

Which one of the following situations at Sturgis contravenes Part III of the Handbook?

A	Based on historical information, Sturgis recognizes revenue on non-binding pledges receivable.
B	Sturgis does not recognize volunteer services or contributed materials.
C	Sturgis had revenues of $470,000 in Year 2 and $540,000 in Year 1. All capital asset purchases were expensed in Year 2.
D	Sturgis paid $400,000 in the year for land purchased from a regular donor that has a fair market value of $700,000. It reports the asset at $700,000.

Sturgis had revenues of $470,000 in Year 2 and $540,000 in Year 1. All capital asset purchases were expensed in Year 2

Path Together is an NPO that had pledges of $120,000 during its annual pledge drive, of which it has historically collected 90%. The pledges are related to the organization’s current fiscal year operations. Which one of the following statements regarding the pledges is true?

A	Path Together should record contribution revenue of $120,000.
B	Path Together should record $108,000 in (net) pledges receivable.
C	Path Together can choose to record pledges or can choose to only disclose the pledges.
D	Path Together cannot record the pledges until the amounts are collected.

Path Together should record $108,000 in (net) pledges receivable

Which one of the following statements about an NPO's financial statements is true?

A	NPOs must use the term “statement of financial position.”
B	For NPOs using fund accounting, the definition of fund is set by the users of the financial statements.
C	The statement of operations and the statement of changes in net assets can be combined into a single statement for NPOs using fund accounting.
D	NPOs must report on an aggregate basis, regardless of whether it has funds or not.

The statement of operations and the statement of changes in net assets can be combined into a single statement for NPOs using fund accounting.

Which of the following criteria must be met for an NPO that chooses to recognize contributed goods and services?

A	The goods and services must be used in operations and would have been purchased if they had not been donated, and the fair value must be reasonably estimated.
B	Collection of the goods must be reasonably assured and the fair value must be reasonably estimable.
C	Collection of the goods must be reasonably assured and the goods and services would have been purchased if they had not been donated.
D	The goods and services would have been purchased if they had not been donated and the fair value must be certain.

The goods and services must be used in operations and would have been purchased if they had not been donated, and the fair value must be reasonably estimated.

Mood Productions (Mood), an NPO, operates a theatre for at-risk young adults. Mood received a donation of paint for use in theatre productions from a long-time donor. The paint, which would cost $10,000 new, had a fair value of $7,000 at the time of the donation. Although the NPO had no plans to purchase paint, the director found several uses for the paint, such as refurbishing props and sets.

Which one of the following statements best describes how the paint must be recognized in Mood’s financial statements?

A	The paint can be recorded for $7,000, or can be disclosed.
B	The paint must be recorded for $7,000.
C	The paint must be recorded for $10,000.
D	The paint cannot be recorded in Mood’s financial statements, but must be disclosed

The paint cannot be recorded in Mood’s financial statements, but must be disclosed

Which one of the following is a required disclosure for NPOs reporting under Part III of the Handbook?

A	The identity of any donor who donates more than 10% of total revenue
B	The names and amounts of any pledges receivable not recognized in the financial statements of the NPO
C	A description of the NPO’s purpose
D	Biographical information about the executive director (or equivalent) of the NPO

A description of the NPO’s purpose

Which one of the following would be considered an internal restriction for the Edmonton Polish Club, an NPO?

A	When the organization ordered new computers for its employees, an entry was made to indicate that resources must be set aside to pay when the computers are delivered.
B	A $150,000 contribution was received in the year. The principal cannot be spent, but any investment income earned on the investment can be used without restriction.
C	A new donor contributed $14,000 to the club’s breakfast program.
D	The board determined that a new roof will be required in approximately two years, and that the current year’s $50,000 surplus should be used for that purpose.

The board determined that a new roof will be required in approximately two years, and that the current year’s $50,000 surplus should be used for that purpose.