Submitted by: Submitted by MSwan2727
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Category: Business and Industry
Date Submitted: 05/10/2014 12:56 PM
SFAS 116 and 117 Executive Summary
The Statement of Financial Accounting Standards 116 and 117 focus on contributions and the formatting of financial statements. These standards have been implemented for not-for-profits so that they are held to a higher standard and follow the regulations carefully so there is no misuse of finances given there are less restrictions on not-for-profits than private businesses.
SFAS 116
The Financial Accounting Standards Board (FASB) created the SFAS 116 to regulate unrestricted pledges. The unrestricted pledges are to be reported as revenue in the period it was received. If a pledge has been designated and not received, it shall be reported at this time. Given then a pledge may not be received. The not-for-profit should take into account that some pledges may be uncollectible. With pledges of cash that are being promised but not received, these shall be listed in a temporarily restricted fund until they are received and can move them.
SFAS 117
FASB Statement No. 117 directs that revenues and expenses be reported in a statement of activities (Government and Not-For-Profit Accounting, 2011). All expenses are to be reported under the unrestricted net assets category. The financial statements focus on the organization on a whole rather than each fund. This gives a bigger picture of the organization and how they are financially. One important fact to the statements is that they must break out gains and losses from investments.
These two statements which have been put into place by the Financial Accounting Standards Board are beneficial to a not-for-profit to operate with a standard so all stakeholders can be confident in their operation with not only the functions of the not-for-profit but the financial activity as well.
References
Granof, M. H. & Khumawala, S.B.. (2011). Government and not-for-profit accounting. Concepts and practices. Retrieved from http://ecampus.phoenix.edu