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Auditing and Accounting Guide: Not-for-Profit Entities, 2019

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Auditing and Accounting Guide: Not-for-Profit Entities, 2019

AICPA

ISBN: 978-1-948-30682-9 June 2019 784 Pages

1 Introduction 01-.27

Scope 01-.12

GAAP for NFPs 13-.19

Fund Accounting and Net Asset Classes 20-.25

Other Resources for Financial Reporting by NFPs 26-.27

2 General Auditing Considerations 01-.150

Overview 01-.02

Purpose of an Audit of Financial Statements 03-.08

Terms of Engagement 09-.11

Audit Planning Considerations 12-.59

Use of Assertions in Assessment of Risks of Material Misstatement 60-.64

Risk Assessment Procedures 65-.88

Using Risk Assessment to Design Further Audit Procedures 89-.111

Evaluation of Misstatements Identified During the Audit 112-.114

Communication With Those Charged With Governance 115-.121

Completing the Audit 122-.149

Appendix A — Consideration of Fraud in a Financial Statement Audit 150

3 Financial Statements, the Reporting Entity, and General Financial Reporting Matters 01-.197

Introduction 01-.05

Statement of Financial Position 06-.28

Statement of Activities 29-.45

Statement of Cash Flows 46-.58

Comparative Financial Information 59-.61

Reporting of Related Entities, Including Consolidation 62-.125

Mergers and Acquisitions 126-.139

Collaborative Arrangements 140-.141

The Use of Fair Value Measures 142-.175

Financial Statement Disclosures Not Considered Elsewhere 176-.188

Auditing 189-.196

Supplement A — Flowcharts 197

4 Cash, Cash Equivalents, and Investments 01-.110

Cash and Cash Equivalents 01-.04

Investments Discussed in This Chapter 05-.10

Initial Recognition and Measurement of Investments11-.12

Valuation of Investments Subsequent to Acquisition13-.44

Investment Income and Expenses 45-.49

Unrealized and Realized Gains and Losses 50-.53

Investments Held as an Agent 54

Investment Pools 55-.61

Endowment Funds 62-.73

Financial Statement Presentation 74-.82

Disclosures 83-.94

Auditing 95-.109

Appendix A — Determining Fair Value of Alternative Investments 110

5 Contributions Received and Agency Transactions 01-.234

Introduction 01-.04

Distinguishing Contributions From Other Transactions 05-.57

Core Recognition and Measurement Principles for Contributions 58-.81

Additional Accounting Considerations for Certain Contributions 82-.171

Measurement Principles for Contributions Receivable 172-.204

Financial Statement Presentation 205-.207

Disclosures 208-.214

Auditing 215-.232

Appendix A — Excerpt From AICPA Financial Reporting White Paper Measurement of Fair Value for Certain Transactions of Not-for-Profit Entities 233

Appendix B — Technical Questions and Answers About Financially Interrelated Entities 234

6 Split-Interest Agreements and Beneficial Interests in Trusts 01-.95

Introduction 01

Types of Split-Interest Agreements 02-.03

Recognition and Measurement Principles 04-.45

Financial Statement Presentation 46-.53

Examples of Split-Interest Agreements 54-.87

Auditing 88-.93

Appendix A — Excerpt From AICPA White Paper Measurement of Fair Value for Certain Transactions of Not-for-Profit Entities 94

Appendix B — Journal Entries 95

7 Other Assets 01-.47

Introduction 01

Inventory 02-.11

Prepaid Expenses, Deferred Costs, and Similar Items 12-.16

Collections and Works of Art, Historical Treasures, or Similar Assets 17-.29

Goodwill 30-.32

Intangible Assets Other Than Goodwill 33-.37

Auditing 38-.47

8 Programmatic Investments 01-.71

Introduction 01-.07

Core Considerations for Accounting and Reporting 08

Loans 09-.52

Equity Instruments 53-.61

Programmatic Equity Investments That Are Consolidated 55

Programmatic Equity Investments Reported Using the Equity Method 56-.58

Guarantees 62

Concentrations of Risk 63

Presentation of Programmatic Investments 64-.69

Program-Related Investments of Private Foundations 70

Auditing 71

9 Property and Equipment 01-.47

Introduction 01-.02

Recognition and Measurement Principles 03-.32

Financial Statement Presentation 33-.38

Auditing 39-.47

10 Debt and Other Liabilities 01-.117

Introduction 01

Fair Value Measurement 02-.08

Municipal Bond Financing and Other Long-Term Debt 09-.87

Tax Liabilities 88

Deferred Revenue 89

Refunds Due to and Advances from Third Parties 90

Promises to Give 91-.95

Split-Interest Obligations 96

Amounts Held for Others under Agency Transactions 97

Revenue Sharing and Other Agreements 98

Exit or Disposal Activities 99

Guarantees 100-.101

Contingencies 102

Pension and Other Defined Benefit Postretirement Auditing 111-.115

Appendix A — Municipal Securities Regulation 116

Appendix B — Auditor Involvement with Municipal Securities Filings 117

11 Net Assets and Reclassifications of Net Assets 01-.58

Introduction 01-.02

Fiduciary Responsibilities to Meet Donor Restrictions 03-.08

Net Asset Classes 09-.11

Net Assets with Donor Restrictions 12-.22

Noncontrolling Interests 23-.25

Reclassifications of Net Assets 26

Expiration of Donor-Imposed Restrictions 27-.47

Disclosures 48-.54

Changing Net Asset Classifications Reported in a Prior Year 55

Auditing 56-.58

12 Revenues and Receivables from Exchange Transactions 01-.25

Introduction 01-.02

Difference between Revenues and Gains 03-.05

Recognition, Measurement, and Display of Revenue 06-.14

Receivables from Exchange Transactions 15-.17

Auditing 18-.24

Appendix A — Implementation Guidance for FASB Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606)25

13 Expenses, Gains, and Losses 01-.142

Introduction 01

Expenses 02-.06

Expense Recognition Issues 07-.34

Gains and Losses 35-.50

Functional Reporting of Expenses 51-.132

Income Taxes 133

Auditing 134-.139

Supplement A — Accounting for Joint Activities 139

Supplement B — Examples of Applying the Criteria of Purpose, Audience, and Content to Determine Whether a Program or Management and General Activity Has Been Conducted 140

Supplement C — Allocation Methods for Joint Costs 141

Supplement D — Examples of Disclosures 142

14 Reports of Independent Auditors 01-.30

Reports on Financial Statements 01-.02

Reports on Comparative Financial Statements and Presentation of Comparative Information 03-.08

Unmodified Opinions 09

Modified Reports and Departures from Unmodified Opinions 10

Going Concern 11

Reporting on Supplementary Information 12-.14

Special Considerations 15-.16

Reporting Under Other Technical Standards 17-.21

Reporting on Prescribed Forms 22-.25

Reports Required by Government Auditing Standards, the Single Audit Act Amendments of 1996, and the Uniform Guidance26-.30

15 Tax and Regulatory Considerations 01-.74

Introduction 01-.03

Internal Revenue Service 04-.38

Income Tax Positions 39-.43

Deferred Tax Assets and Liabilities 44-.45

State and Local Regulations 46-.56

Securities Regulation 57-.60

Sarbanes Oxley and Governance Policies 61-.63

Executive Compensation 64-.67

Other Regulatory Activities 68-.70

Auditing 71-.74

16 Fund Accounting 01-.23

Introduction 01

Fund Accounting and External Financial Reporting 02-.05

Unrestricted Current (or Unrestricted Operating or General) Funds 06-.07

Restricted Current (or Restricted Operating or Specific-Purpose) Funds 08-.09

Plant (or Land, Building, and Equipment) Funds 10-.14

Loan Funds 15-.16

Endowment Funds 17-.19

Annuity and Life-Income (Split-Interest) Funds 20-.21

Agency (Or Custodian) Funds 22

Summary 23

Appendix

A FASB Accounting Standards Codification 958, Not-For-Profit Entities, Topic Hierarchy

B The New Revenue Recognition Standard: FASB ASC 606

C The New Leases Standard: FASB ASC 842

D Information Sources

E Overview of Statements on Quality Control Standards

F Schedule of Changes Made to the Text From the Previous Edition

Glossary

Index of Pronouncements and Other Technical Guidance

Subject Index