Chapter 2 of 6Area I, 30–40% of exam

Area I: Not-for-Profit and Government Reporting

This part of Area I covers statements of nongovernmental not-for-profit entities and the fund and government-wide concepts of state and local governments. Expect to classify net assets, choose the right fund and apply each fund's measurement focus.

Not-for-profit entities and state and local governments

Nongovernmental not-for-profit entities report two classes of net assets and release donor restrictions when purposes or time requirements are met. Governments report fund statements and government-wide statements on different measurement focuses. Fund selection follows the purpose of the resources: general government, restricted revenue, capital projects, debt service, permanent funds, business-type enterprise and internal service funds, and fiduciary funds.

Two net asset classes

Net assets are reported as with donor restrictions or without donor restrictions; board designations remain without donor restrictions.

FASB ASC 958-210-45-1; ASU 2016-14

Expenses by nature and function

Every NFP presents an analysis of expenses by both nature and function in one location, on the face of a statement or in the notes.

FASB ASC 958-720-45-15

Governmental fund basis

Governmental funds use the current financial resources measurement focus and modified accrual basis; government-wide, proprietary and fiduciary reporting use economic resources and accrual.

GASB Statement 34; GASB Codification Sec. 1600

Fund definitions

Special revenue, capital projects, debt service and permanent funds are defined by the restriction or commitment of their resources.

GASB Statement 54

Custodial funds

Fiduciary activities not held in a qualifying trust, such as taxes collected for other governments, are reported in custodial funds.

GASB Statement 84

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