Statement of Activities (3)

According to SFAS 116, Accounting for Contributions Received and Contributions Made, in the absence of a donor’s explicit stipulation or circumstances surrounding the receipt of the contribution that make clear the donor’s implicit restriction on use, contributions are reported as unrestricted revenues or gains (unrestricted support), which increase unrestricted net assets. Donor-restricted contributions are reported as

restricted revenues or gains (restricted support), which increase temporarily restricted net assets or permanently restricted net assets depending on the type of restriction. However, donor-restricted contributions whose restrictions are met in the same reporting period may be reported as unrestricted support provided that an organization reports consistently from period to period and discloses its accounting policy. Accounting for contributions is more fully discussed in Chapter 5.

The statement of activities also reports gains and losses recognized on investments and other assets (or liabilities) as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations or by law. For example, net gains on investment assets, to the extent recognized in financial statements, are reported as increases in unrestricted net assets unless their use is restricted to a specified purpose or future period. If the governing board determines that the relevant law requires the organization to permanently retain some portion of gains on investment assets of endowment funds, that amount shall be reported as an increase in permanently restricted net assets. Accounting for investments is more fully discussed in Chapter 6.

The statement of activities reports expenses as decreases in unrestricted net assets.

Classifying revenues, expenses, gains, and losses within classes of net assets does not preclude incorporating additional classifications within a statement of activities. For example, within a class or classes of changes in net assets, an organization may classify items as operating or nonoperating, expendable and nonexpendable, earned and unearned, recurring and nonrecurring, or in other ways.

Expirations of donor-imposed restrictions that simultaneously increase one class of net assets and decrease another are referred to as reclassifications. According to SFAS 117, re-classifications are required to be reported as separate items on the statement of activities.

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

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