Understanding NFP Financial Reporting for Not-For-Profit

School: Colorado State University, Global Campus - Course: ACT 555 - Subject: Accounting

NFP Financial Reporting Tammy Weatherford Colorado State University Global ACT555 Dr. Dushyant Gosai November 27, 2022 NFP Financial Reporting Recording all in-kind contributions is vital in ensuring that the organization keeps track of its processes and activities. To avoid misunderstanding and misuse, all non-profit organizations require records of their actions, services, and financial flow. The in-kind donations and other charitable services are essential in helping the not-for-profit organization run smoothly. Such organizations rely on well-wishers' help to obtain the necessary resources and services to function effectively. However, recording service donations for not-for-profit organizations is crucial due to the challenges that may arise. The organization must be aware of the rules dictating what contributions to record and how to achieve the goal. They must adhere to the specific requirements to function effectively. Recording service donations enable the organization to identify and list the fair values of the contributions, enabling stakeholders to track volunteer actions in the organization. What criteria must be met before a not-for-profit organization can record donated services? While not-for-profit organizations receive various in-kind donations, including services, the organizations should not record all contributions. The donated services must meet specific criteria to be recognized and recorded. First, services should be recorded when a donated service creates a financial asset out of a non-financial asset (Savasta, 2022). If a donated service adds value to non-financial assets, the organization should recognize it and its role. For instance, all services that may be provided to construct a building add value to the structure, prompting the accounting personnel to record the services as donated services. Additionally, such services should be regarded as income to the organization and capitalized to the asset. In this case, the accounting personnel should record the donated services, whether professionals or persons provide them with specialized skills. Recording donated

Why is this page out of focus?

Because this is a Premium document. Subscribe to unlock this document and more.

3 services enable stakeholders to understand the value of all essential service donations to the organization. Second, services can be recorded as donations if individuals provide them with specialized skills. Volunteer hours by well-wishers may only necessarily be service donations if the individuals possess specialized skills in the specific areas (Savasta, 2022). For example, a professional accountant can provide accounting services to the organization, qualifying such services as in-kind donations. Still, computer specialists, lawyers, or architects can donate their professional skills to not-for-profit organizations. The accounting personnel at the organization should record such services as donations. However, the organizations should differentiate between individuals with specialized skills and those that undergo extensive training at not-for-profit organizations to provide the necessary services. The individuals must possess some certification for their input to qualify as service donations, and the organization to record the activities and processes. Recognizing individuals' professional status allows the organization to record their donated services and to keep track of the changes. Third, services that the not-for-profit organization would need to purchase had they not been donated must be recognized and recorded. The organization should record all the services purchased or provided by professionals (Savasta, 2022). The not-for-profit organizations would need to buy such services, but since they have been donated, they only recognize and record the providers and the offered services. For instance, most organizations require professional accounting services to ensure proper financial flow and asset management records. They would need to purchase such services if they do not have the professionals within their teams. When a volunteer offers such accounting services, the organization should record them as service donations. Identifying and recording professional service donations enable the organization and stakeholders to understand their fair values and how they impact the organization.