Neil Emerson P.

Valdez
Cash and other Non-cash assets
 Recognized as revenues in the period received and as assets, decreases of
liabilities, or expenses depending on the form of the benefits received.
 Measured at fair value at the date of contribution and are reported as either:
a. Unrestricted support- revenue from unrestricted contributions.
b. Restricted support- revenue from temporarily restricted or permanently
restricted contributions.
 Available for immediate use and for any purpose.

 Example:
A non-profit organization receives cash of P200,000 and land with Fair Value of
P1,000,000 to be used at the entity’s discretion.

Journal entry:
Cash 200,000
Land 1,000,000
Contribution Revenue- 1,200,000
unrestricted support
 Revenue from:
a. Temporarily restricted- restricted by donor in such a way that the availability of the
contribution for the NPO’s use is dependent upon the performance of a specific
task, the happening of a future event, or the passage of time.
b. Permanently restricted- restricted by donor in such a way that the organization will
never be able to use the contribution itself; however, the organization may be able
to use the income therefrom.
 Example:
On January 1, 2019, Entity A, a non-profit organization received the following
donations from a Korean star named Park Ray Mart:

 Cash of P12,000,000 to be used to acquire a truck. The truck will be used in Entity A’s
outreach programs.
 Investment in equity securities with fair value of P500,000 to be held indefinitely. Only the
investment income shall be used by Entity A in its operations.

• On December 31,2019, Entity A acquired a truck for 12,000,000 and received cash dividends of
P60,000 from the equity securities.
Journal Entries:

Jan. 1,2019 Cash 12,000,000

Contributions Revenue- 12,000,000
Temporarily restricted support
Investment in equity securities 500,000
Contributions Revenue- 500,000
Permanently restricted support
Dec.31, 2019 Transportation Equipment-Truck 12,000,000
Cash 12,200,000
Cash 60,000
Dividend Income 60,000
 Recognized when the unconditional promise to give is received from the donor.
 Classified as temporarily restricted because of the time restriction.

 Example: On January 1,2019, Entity A received a formal promise from Raymart-san to donate P1,000,000.

Jan.1,2019 Donations Receivable 1,000,000

Contributions Revenue- 1,000,000
temporarily restricted support
Feb.14,2019 Cash 1,000,000
Donations Receivable 1,000,000

Note: When the effect of time value of money is material, receivables shall be measured at present value.
 Recognized when the attached conditions are substantially met.
 Considered as unconditional when the possibility that the conditions will be met is
reasonably certain.
 A transfer of assets with a conditional promise to contribute them shall be
accounted for as a refundable advance (liability) until the conditions have been
substantially met.
 Example: (refer to previous example) The donation is conditioned on the
submission of a detailed formal plan for a proposed project. As of January 1,2019,
the plan is not yet substantially complete.

No entry

 On Feb. 1, Entity A received the promised contribution before the condition is

substantially met.

Feb 1,2019 Cash 1,000,000

Liability for refundable advance 1,000,000
 Recognized if:
a. services received create or enhance nonfinancial assets; or
b. require specialized skills, provided by individuals possessing those
skills, and would typically need to be purchased if not provided by
donation.

 Contributed services and promises to give service that do not meet those criteria are
not recognized
 Example:
Wampipty, a non-profit organization, received the following services:
a. Carpenters repaired the ceiling of Wampipty’s office for free. The
fair value of the service is P1,000,000
b. JPIA members from various universities helped in a tree-planting
activity initiated by Wampipty for free. The fair value of the
services might be P150.

a.) Repairs and maintenance expense 1,000,000

Contribution Revenue- unrestricted support 1,000,000
b.) No entry
 An entity need not recognize contributions of works of art, historical treasures, and
similar assets if the donated items are added to collections that meet all of the
following conditions:

a. Held for public exhibition, education, or research in furtherance of public

service rather than financial gain
b. Protected, kept unencumbered, cared for, and preserved; and
c. Proceeds from sales of collection items are to be used to acquire other items for
collections.
 Endowment fund
a. Term endowment fund- under the donor’s restrictions, the NPO can use a portion of
the principal each period. (classified as temporarily restricted)
b. Regular endowment fund- under the donor’s restrictions, the NPO cannot spend any
of the principal. (Permanently restricted)
 Income from either term or regular endowment fund is used according to donor’s
instruction.
 Agency Fund
- Funds held by NPO acting as a custodian.
- Recognized as liabilities
 (ex. Educational institution may receive funds from CHED to be disbursed as student
loans.)
 Plant Fund
Consists of the following:
a. Unexpended funds for the acquisition of plant assets
b. Funds for the renewal and replacement of plant assets
c. Funds for the retirement of indebtedness
d. Investment in plant assets

 Board designated fund (Quasi-endowment)

- Funds which are restricted at the sole discretion of the NPO’s governing
board (ex. Board of Trustees)
- Considered as unrestricted
 An NPO disclosed the following:
a. Net resources of P1,000,000 invested in plant assets
b. Board-designated funds of P600,000
c. Received P20,000 cash from donor who did not specify any use restrictions on the
contribution. However, the donor specified that the donation should not be used until
2022.
d. Received P800,000 from a donor who stipulated that the contribution shall be
invested indefinitely and that the earnings shall be used for scholarship. Investment
income in 2021 amounted to P50,000

Unrestricted Temporarily Restricted Permanently restricted

1,000,000
600,000
20,000
50,000 800,000
 An NPO receives the following during 2019:
a. P120,000 proceeds from sales of calendars, mugs, t-shirts, and other souvenir
items. The fair value of the items sold is P75,000 while the cost is P50,000.
b. P1,000,000 to be used only upon the completion of a new facility that is only 30%
complete as of December 31,2019. If the facility is not completed by Sept. 2,2020,
the cash shall be returned to the donor.

How much contribution revenue is recognized from the donation above?

Excess of sale price over FV of items sold (120,000-75,000) 45,000

Total Contribution Revenue (Unrestricted) 45,000
 On January 1,2019, an NPO received P100,000 cash donation under a “charitable remainder
annuity trust agreement” with the following provisions:
a. The NPO is the designated trustee who undertakes to invest the cash donation and make
annual year-end payments of P5,000 to Mr. X, the annuitant, for the remainder of his life.
b. Upon death of Mr. X, the NPO may use its remainder interest for any purpose consistent with its
mission.
Per actuarial valuation, the appropriate discount rate is 10% and the annuitant’s life expectancy is 5
years.
Prepare the entry on January 1,2019

1/1/19 Cash 100,000

Annuities payable 18,954 (5000xPVOA of 1@10%, n=5)
Contributions revenue- 81,046 (100,000- 18,954)
temporarily restricted support
 Under Deferral method, restricted contributions are initially considered as liability (Deferred revenue)
and recognized as revenue in the same period where the related expenditures, for which the
contributions were intended to reimburse, are occurred.
 Ex: On Feb. 15,2019, an NPO received P2M cash donation conditioned on the acquisition of a truck.

Feb. 15,2019 Cash 2,000,000

Deferred Revenue 2,000,000

 The NPO acquired a truck for P2M on Jan. 1,2020. The truck will be depreciated over a 10-year useful life
using straight-line method.
Jan. 1,2020 Transportation Equipment-Truck 2,000,000
Cash 2,000,000
Dec. 31,2020 Depreciation Expense 200,000
Accumulated Depreciation 200,000
Deferred Revenue 200,000
Contributions Revenue 200,000
1. Statement of Financial Position- shows information on assets, liabilities, and net
assets.
 SFAS No. 117 requires reporting of net assets in the SOFP according to the following
classifications:
a. Unrestricted net assets
b. Temporarily restricted net assets
c. Permanently restricted net assets

 (PFRS-based FS may present net assets using these classifications either on the
Statement of Financial Position or in the notes)
2. Statement of Activities- shows information on revenues, expenses, and changes
in net assets for a period.
 SFAS No. 117 requires that the statement of activities report the changes in net
assets for each of the 3 categories of support separately.
 In a statement of activities, the term “profit” or “net income” is replaced by the term
“change in net assets”.
 Expenses are reported as decreases in unrestricted net assets.
 SFAS No.117 requires expenses to be presented in the SOA or in the notes
according to their function.
a. Program Services- Major purpose and the major output of the organization
b. Supporting activities- activities other than program services. Generally, these
include management and general expenses, fund-raising, and membership-
development activities.
3. Statement of Cash Flows

 Similar to that of a business entity

 Can be prepared using the 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.

4. Notes