Essay, Pages 2 (467 words)
SFAS 116 and SFAS 117 were created to improve accountability among not-for-profit and government entities. These improvements should simplify the structure of financial statements by making them understandable to both the financial and non-financial audience. SFAS 116 establishes the accounting standards for contributions made and received. All entities that make or receive contributions are required to report the contributions received at fair market value as revenue in the period in which they were received. Likewise, any contributions made must be recognized at fair market value but as expenses in the period in which they were made.
It further requires that not-for-profit organizations classify contributions that increase net assets as either permanently restricted, temporarily restricted, or unrestricted (FASB, 1993).
SFAS 117 concentrates on the external financial statements for not-for-profit organizations. The purpose is to “enhance the relevance, understandability, and comparability of financial statements issued by those organizations” (FASB, 1993) and “requires that all not-for-profit organizations provide a statement of financial position, statement of activities, and statement of cash flows” (FASB, 1993).
NFPs are required to report net assets broken down as permanently restricted, temporarily restricted, or unrestricted in the statement of financial position. The amounts of change for each classification also must be broken down in the statement of activities.
The statement of cash flows must also now contain donor-restricted cash that is used for long-term purposes as being derived from financing activities. Any welfare and voluntary health organizations must report on the statement of functional expenses the function and natural classifications of those expenses (FASB, 1993). All not-for-profit and government organizations must follow these statements.
While the individual accounting processes may be complicated, they will help to promote financial accountability and transparency within those organizations.
- FASB. (1993, June). Statement of financial accounting standards no. 116. Retrieved from http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175820922799&blobheader=application%2Fpdf&blobcol=urldata&blobtable=
- MungoBlobs FASB. (1993, June). Statement of financial accounting standards no. 117. Retrieved from http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175820923228&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs
CERTIFICATE OF ORIGINALITY
I certify that the attached paper is my original work. I am familiar with, and acknowledge my responsibilities which are part of, the University of Phoenix Student Code of Academic Integrity. I affirm that any section of the paper which has been submitted previously is attributed and cited as such, and that this paper has not been submitted by anyone else. I have identified the sources of all information whether quoted verbatim or paraphrased, all images, and all quotations with citations and reference listings.
Along with citations and reference listings, I have used quotation marks to identify quotations of fewer than 40 words and have used block indentation for quotations of 40 or more words. Nothing in this assignment violates copyright, trademark, or other intellectual property laws. I further agree that my name typed on the line below is intended to have, and shall have, the same validity as my handwritten signature.