The Requirements of Sfas 116 117 Their Effect on Financial Statements free essay sample

- The Requirements of SFAS 116 and 117 and its effect on the financial statements The Statement of Financial Accounting Standards (SFAS) 116 and 117 are standards set for not- for-profit and non-governmental entities. The standards account for contributions and financial statement presentation (Granof, Khumawala, 2011). SFAS 116 defines how contributions are designated. Contributions can have donor-imposed restrictions.The standard defines three types of designations: 1. Permanently Restricted – The asset is specific by the donor, the principal is permanently restricted, but the income is available for use. 2. Temporarily restricted – The asset is restricted by purpose and time. The donor places the restrictions on the asset. The donor may request the asset be used for a specified purpose or time once the purpose or time has been fulfilled restriction is lifted. 3.Unrestricted – If the donor does not place any restrictions on the asset the asset is unrestricted. SFAS 117 clarifies the reporting of contributions for not-for-profit organizations on their financial statements. We will write a custom essay sample on The Requirements of Sfas 116 117 Their Effect on Financial Statements or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The standard requires three financial statements for not-for-profit entities: 1. Statement of Financial Position – essentially a Balance Sheet 2. Statement of Activities – SFAS 117 directs the revenues and expenses on the statement of activities focus on the organization as a whole versus individual funds. Gains and losses recognized on investments must be broken out from other assets. 3. Statement of Cash Flows Not-for-profit organizations need to be familiar with the changes that relate to SFAS 116 and 117 to be in compliance and to ensure the organization is reporting contributions correctly. References: Granof, Michael H. , Khumawala, Saleha B. , (2011). Government and Not-For-Profit Accounting (5th ed. ). River City, NJ: John Wiley Sons, Inc.