Donations in Cash Are Easy to Measure, Essay Example

Donations in cash are easy to measure. What is the treatment that not-for-profit organizations use for donated goods and services?

Donated goods and services are recorded as support in the organization’s records if several conditions are met. These conditions can be recorded provided that the services created nonfinancial assets and required specialized skills that would have needed to have been purchased if they were not donated. As a consequence, financial statements are required to have a description of the donated service in addition to how it was used. While some volunteer services are not required to be reported for financial purposes, this donation of time is often reported to the public in order to demonstrate the support that exists for the organization.

To what extent do not-for-profit organizations have the ability to choose among the following:

All non-for-profit organizations are required to depreciate their buildings and equipment, although they have the option to determine and report the depreciation of the assets. However, reporting all assets in this manner is not a universal practice.      

Depreciation cannot be entirely ignored because non-for-profit organizations must account the depreciation value of the items that have been donated to them. It is necessary for them to report the depreciation values of buildings and equipment as well.

Non-for-profit organizations are only required to report the depreciated value of building and equipment on the balance sheet, in addition to a report of the value of donated goods or services.

Assets should be showed at their depreciated value if they were contributed in the form of a donation. The depreciated value will be shown over time.

Assets cannot be charged as expenses in the year acquired.

How does the accounting industry define a not-for-profit organization and a VHWO?

The accounting industry defines a non-for-profit organization as one that receives contributions from providers that do not expect an equal return, has goals other than providing goods and services for a profit, and has an absence of ownership interest. A VHWO (voluntary health and welfare organization) is defined as a specific category of non-for-profit organization that provides voluntary services supported by the public that attempt to solve health and welfare problems and profit from the voluntary services.

Distinguish between the way investor owned and not-for-profit health care    organizations treat investments.

Investor owned health care organizations track their securities according to three categories: held-to-maturity securities, trading securities, and available-for-sale securities. The value of some of these alter according to market value. Held-to-maturity securities will be held until their maturity date. Trading securities are debt and equity securities that are bought principally for selling them in the near term. Available-for-sale securities are all debt and security equities that do not qualify as held-to-maturity or trading securities. For both investor owned and non-for-profit owned health care organizations, the cash flow statements treat sales and maturities of trading securities as being cash from operating activities. The remainder of the cash is treated as an investment activity. For non-for-profit organizations, gains and losses are included in the net assets. Furthermore, all debt securities are shown at fair value.

References

Finkler, S. A. (2010). Financial management for public, health, and not-for-profit organizations (3rd ed.).Upper Saddle River, NJ: Prentice Hall.