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Area I: Financial ReportingNFP accountingASC 958ASU 2016-14net asset classification

CPA · Question 42 · Area I: Financial Reporting

Harmony NFP has the following net assets at year-end:<br/>- Net assets without donor restrictions: $800,000<br/>- Net assets with donor restrictions for programs: $300,000<br/>- Net assets with donor restrictions for capital improvements: $150,000<br/>- Net assets with donor restrictions in perpetuity (endowment): $200,000<br/><br/>How should Harmony present these amounts in its statement of financial position?

Answer options:

A.

Unrestricted: $800,000; Temporarily restricted: $450,000; Permanently restricted: $200,000

B.

Net assets without donor restrictions: $800,000; Net assets with donor restrictions: $650,000

C.

Four separate line items as listed in the question

D.

Total net assets: $1,450,000 with no subcategories

How to approach this question

Under ASU 2016-14, NFPs present net assets in two categories: without donor restrictions and with donor restrictions. Combine all restricted amounts regardless of the type or duration of restriction.

Full Answer

B.Net assets without donor restrictions: $800,000; Net assets with donor restrictions: $650,000✓ Correct
Net assets without donor restrictions: $800,000; Net assets with donor restrictions: $650,000
ASU 2016-14 amended ASC 958 to require NFPs to present net assets in two categories: (1) without donor restrictions and (2) with donor restrictions. The old three-category model (unrestricted, temporarily restricted, permanently restricted) was eliminated. All restricted amounts are combined: $300,000 + $150,000 + $200,000 = $650,000.

Common mistakes

Using the old three-category presentation, presenting each restriction type separately, or not aggregating all restricted amounts
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