Financial Statements of Not-for-Profit Organizations (SFAS No. 117)
1. Purpose The FASB issued SFAS No. 117 in 1993. This statement establishes standards for general-purpose external financial statements provided by a not-for-profit organization. The purpose of financial statements is to provide information about
1) the amount and nature of an organization’s assets, liabilities, and net assets,
2) the effects of transactions and other events that change the amount and nature of net assets,
3) the amount and kinds of inflows and outflows of economic resources during a period and the relation between the inflows and outflows
4) how an organization obtains and spends cash, its borrowing and repayment of borrowing, and other factors that may affect its liquidity, and
5) the service efforts of an organization.
2. Required Statements SFAS No. 117 requires a
3. The Statement of Financial Position, sometimes known as a balance sheet, provides information about an organization’s assets, liabilities, and net assets at a specific moment in time. Even though the statement represents amounts for a specific period in time, the statement report often shows amounts from at least one previous period for comparison (although it is not necessary). By comparing the statement amounts between two or more points in time, it is possible to examine the changes in assets between these periods.
The Statement of Financial Position information is used to determine the liquidity and financial flexibility of the organization. It is recommended that the assets and liabilities be listed in order of liquidity. Exception may be made for items for long-term purposes or where donor-imposed restrictions are in effect. These categories should be reflected as separate lines in the statement. An example of a Statement of Financial Position is as follows:
When cash and cash equivalents are received that are restricted to investments in land, buildings or equipment, the amount is not reflected in "cash and cash equivalents", but in the line item "Assets restricted to investment in land, buildings, and equipment". This example also shows how the net assets are separated into unrestricted, temporarily restricted and permanently restricted assets. The categories of temporarily and permanently restricted assets should be accompanied by relevant details about the amounts listed. These can be written on the face of the statement, or included in statement notes. It is again suggested that comparative statements be provided in order to provide information to be used for the statement of cash flows.
4. The Statement of Activities, provide relevant information about 1) the effects of transactions and other events and circumstances that change the amount and nature of net assets, 2) the relationships of those transactions and other events and circumstances to each other, and 3) how the organization’s resources are used in providing various programs or services. This statement is compiled for transactions across a period of time, usually a month or a year, and is used to evaluate the organization’s performance, by observing the change in net assets, during that period of time.
Other formats for the Statement of Activities may also be used. The format should always distinguish between the unrestricted, temporarily-restricted and permanently restricted assets.
5. The Statement of Cash Flow's purpose of this statement is to provide information about the cash inflows and cash outflows of the organization during a specified period of time. Either the direct method or the indirect method may be used to report cash flow.
XYZ NPO
Statement of Financial Position
December 31, 1998 and 1999
(in thousands)
1999 1998
Assets:
Cash and cash equivalents $ 100 $ 620
Accounts and interest receivable 2,850 2,250
Inventories and prepaid expenses 820 1,350
Contributions receivable 4,075 3,600
Short-term investments 1,900 1,350
Assets restricted to investment in land, buildings and equipment 7,000 6,100
Land, buildings and equipment 83,100 85,650
Long-term investments 294,000 274,100
Total Assets 393,845 375,020
Liabilities and net assets:
Accounts Payable $ 3,460 $ 1,400
Refundable advance 1,200 3,280
Notes Payable 2,200 3,800
Long-term debt 7,400 8,750
Total liabilities 14,260 17,230
Net assets:
Unrestricted $ 150,625 $ 134,120
Temporarily restricted 38,430 42,820
Permanently restricted 190,530 180,850
Total net assets 379,585 357,790
Total liabilities and net assets 393,845 375,020
XYZ NPO
Statement of Activities
Year Ended December 31, 1999
(in thousands)
Changes in unrestricted net assets:
Revenues and gains:
Contributions $19,000
Income on long-term investments 7,500
Other investment income 1,100
Net unrealized and realized gains on long-term investments 11,000
Other
200
Total unrestricted revenues and gains 38,750
Net assets released from restrictions
Satisfaction of program restrictions $16,200
Satisfaction of equipment acquisition restrictions 3,155
Expiration of time restrictions 1,700
Total net assets released from restrictions
21,055
Total unrestricted revenues, gains, and other support 59,805
Expenses and losses:
Program A $17,600
Program B 11,500
Program C 7,800
Management and general 6,300
Total expenses 43,200
Fire loss 100
Total expenses and losses
43,300
Increase in unrestricted net assets
16,505
Changes in temporarily restricted net assets:
Contributions $11,000
Income on long-term investments 3,000
Net unrealized and realized gains on long-term investments 2,000
Actuarial loss on annuity obligations (590)
Net assets released from restrictions (19,800)
Decrease in temporarily restricted net assets (4,390)
Changes in permanently restricted net assets:
Contributions $332
Income on long-term investments 160
Net unrealized and realized gains on long-term investments 6,200
Increase in permanently restricted net assets 9,680
Increase in net assets $21,795
Net assets at beginning of year 357,790
Net assets at end of year 379,585
Indirect Method
XYZ NPO
Statement of Cash Flows
Year Ended December 31, 1999
(in thousands)
Cash flows from operating activities:
Change in net assets $17,800
Adjustments to reconcile change in net assets to
net cash used by operating activities:
Fire loss 100
Actuarial loss on annuity obligation 590
Increase in accounts and interest receivable (600)
Decrease in inventories and prepaid expenses 530
Increase in contributions receivable 475
Increase in accounts payable 2,060
Decrease in refundable advance (2080)
Contributions restricted for long-term investment (4,300)
Interest and dividends restricted on long-term investment (400)
Net unrealized and realized gain on long-term investments (18,220)
Net cash used by operating activities (50)
Cash flows from investing activities:
Insurance proceeds from fire loss on building $300
Purchase of equipment (2,000)
Proceeds from sale of investments 102,500
Purchase of investments (100,900)
Net cash used by investing activities (100)
Cash flows from financing activities:
Proceeds from contributions restricted for:
Investment in endowment $2,000
Investment subject to annuity agreements 270
Other financing activities
Interest and dividends restricted for reinvestment 400
Payment of annuity obligations (190)
Payments on notes payable (1,500)
Payments on long-term debt (1,350)
Net cash used by financing activities (370)
Net decrease in cash and cash equivalents $ (520)
Cash and cash equivalents at beginning of year
620
Cash and cash equivalents at end of year $ 100