Statement of Activities (2)

1. Expenses—Outflows or other using up of assets or incurrences of liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations

2. Gains—Increases in net assets from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from revenues

3. Losses—Decreases in net assets from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from expenses

4. Reclassifications—Increases to one net asset class and decreases to another give rise to reclassification. These occur as donor restrictions become satisfied either because of the passage of time or are fulfilled and removed by actions of the organization in compliance with those stipulations. (Reclassifications, accordingly, do not involve inflows, outflows, or other changes in assets or liabilities.)

Classifying amounts as revenues, expenses, gains, or losses varies depending on the nature of each organization’s operations and historical accounting practices. Importantly, the statement of activities must show these classifications of increases and decreases in net assets for each of the three categories of net assets—unrestricted, temporarily restricted, and permanently restricted.

Classification of Revenues, Expenses, Gains, and Losses and Reclassifications

The statement of activities reports revenues as increases in unrestricted net assets unless the use of the assets received is limited by donor-imposed restrictions. For example, fees from rendering services and income from investments generally are unrestricted; however, income from donor-restricted permanent or term endowments may be donor-restricted and increase either temporarily restricted net assets or permanently restricted net assets.

Taken From : Wiley Not-for-Profit Accounting Field Guide 2003