Non-Proft

Organizations
Barredo, Michelle │ Cruzat, Mary Ann│ Tesoro, Joshua
bs acc 5-1
Ludivinia f. victorino, cpa, mba
 “
Helping one person might not
change the whole world, but
it could change the world for
one person .

2
3

◙ Excerpts from IFRSs/PRFRSs

 Non-Profit organization may find

them appropriate.
 Non-Profit organization may
need to amend the
descriptions.
 Non-Profit organization might be
required, or choose to apply
IFRSs.
▫ ,
4

◙ Current trend in practice

 The accounting for non-profit

organization is essentially similar to the
accounting for businesses.
 Notable differences are the
terminologies used in financial
statements.
 Auditor’s report state an opinion on
organization’s compliance with the
PFRSs. (or IFRSs, for internal
organizations.
▫ ,
What is Non-Profit
Organization?

5
6

◙ PFRS principles applicable to NPOs

 Recognition criteria for assets and

liability
 Measurement of asset and liability
 Derecognition of assets and liability
 Presentation of Financial Statements
▫ ,
7

There are five ◙ Accounting for non-profit

important organizations
concepts

1. Focus and
views
2. Adherence Fund Fund
3. Disclosures theory accounting
4. Traits and
characteristics
5. Time basis
8

◙ Contributions

1. Unrestricted.
2. Temporarily restricted
3. Permanently restricted
4. Services
5. Works of art and similar items
▫ ,
9

Services
Barredo, Michelle
10

◙ Services

Recognize if:
 Create or enhance non-financial
assets; or
 Require specialized skill
 ,
11

◙ Work of Arts & Similar Items

 Do not recognize if all conditions are met:

 Held for public exhibition, education or
research in furtherance of public services
rather than financial gain;
 Protected, kept unencumbered, cared for
and preserved; and
 Proceeds from sales of collection items
are to be used to acquire other items for
collection.
12

◙ Other funds held by NPOs

 Endowment Fund
 Agency Fund
 Plant Fund
 Board-Designated Fund
13

■ Endowment Fund

a. Term Endowment Fund

• can use a portion of the principal,

• “Temporarily restricted.”

b. Regular Endowment Fund

• cannot spend any of the principal,
• “Permanently restricted.”
14

■ Agency fund

 funds held by NPO acting as a

custodian.
 recognized as liabilities.
15

■ Plant fund

 Unexpended fund for the

acquisition of plant assets;
 Funds for the renewal and
replacement of plant assets;
 Funds for the retirement of
indebtedness; and
 Investment in plant assets.
16

■ Board-designated fund

 Restricted at the sole discretion of

the NPOs governing board.
 Funds that are internally
restricted are classified as
unrestricted.
Illustration 1

Unrestricted Net Temporarily restricted Permanently restricted

Asset Net Asset Net Asset

a 1,000,000

b 600,000

c 20,000

d 50,000 800,000

Totals 1,600,00 70,000 800,000

17
Illustration 1

 Total Contributions revenue =

Sales price – FV of items sold

 P1,000,000 Liability (refundable advance)

18
Illustration 3
Unrestricted Net Asset Temporarily restricted
Net Asset
A. Revenue 200,000
Release 120,000 (120,000)
Expense (120,000)
Net effect - 80,000

B. Release 50,000 (50,000)

Expense (50,000)
Net effect - (50,000)
TOTAL NET
EFFECT P30,000

19
20

◙ Deferral Method

 restricted contributions are

initially recognized as liability;

 Recognized as revenue in the

same period where the related
expenditures are incurred.
▫ ,
20x1------------------------------------------------------------
Feb 1 Cash 2,000,000
Deferred revenue 2,000,000
20x2-------------------------------------------------------------
Jan 1 Truck 2,000,000
Cash 2,000,000

Dec 31 Depreciation Expense 200,000

Accumulated Dep’n 200,000

Deferred Revenue 200,000

Contributions Revenue 200,000
22

Financial
Statements
Cruzat, Mary Ann
23

◙ Financial Statements

 Statement of Financial Position

 Statement of Activities
 Statement of Cash Flows
 Notes
▫ ,
24

■ Statement of
Financial Position

 It shows information on assets,

liabilities, and net assets.
25

□ Classification of Net Assets

1. Unrestricted net assets

2. Temporarily restricted net
assets
3. Permanently restricted net
assets
▫ ,
26

■ Statement of Activities

 It shows information on revenues,

expenses, and changes in net assets
for a period.
 It takes the place of income
statement and statement of changes
in equity for a business entity.
 The term “profit” or “net income” is
replaced by the term “change in net
assets”
27

□ Expenses

 A statement of activities shall

report expenses as a decrease
in unrestricted net assets.
 ,
28

□ Functional Classification
of Expenses

1. Program services
2. Supporting activities
29

■ Statement of
Cash Flows

 It can be prepared using direct or

indirect method.
 Restricted assets acquired during
the period that are used for long-
term purposes because of donor
restrictions are classified as
financing activities.
Accounting procedures
peculiar to specific
types of NPOs

30
31

◙ Health Care Organizations

1. Statement of financial position

2. Statement of operations
3. Statement of changes in net assets
4. Statement of cash flows
5. Notes to financial statements
32

◙ Presentation of revenues in
the Statement of Operations

a. Net patient revenue – gross patient

service revenue less contractual
adjustments, employee discounts
and billed charity care
b. Premium revenue – results from
capitation agreements
c. Other revenues – other revenues
33

◙ Presentation of contributions in
the Statement of Operations

 Restricted revenues are presented

separately from the revenues
section of the statement of
operations.
34

◙ Disclosure of
Performance Indicator

 According to the AICPA Guide, the

statement of operations shall
provide a performance indicator.
The policy used in determining the
performance indicator shall be
disclosed in the notes.
35

◙ Private, Non-Profit, Colleges

and Universities

 Scholarships
 Fellowships
36

◙ Voluntary Health and Welfare

Organizations

 Statement of functional expenses

37

◙ Accounting for other assets held

by NPOs

 accrual basis of accounting

 apply PFRS 9
 depreciate in accordance with PAS
16
 recognize impairment loss in
accordance with PAS 36
 Account for leases in accordance
with PFRS 16
 Thanks!
Barredo, Michelle │ Cruzat, Mary Ann│ Tesoro, Joshua
bs acc 5-1
Ludivinia f. victorino, cpa, mba


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