Accounting and Reporting for Not-for-Profit Organizations

Case Study 2

Statement of Activities

Learning objectives

• Identify the differences between summarized and GAAP comparative financial statements.
• Identify what is meant by the terms restrictions and designations.
• Analyze the presentation of changes in net assets on the statement of activities.

Comparative versus summarized financial statements

The statement of activities is a required financial statement for not-for-profits (NFPs). FASB Accounting Standards Codification 958, Not-for-Profits Entities, requires that the statement represent the NFP entity as a whole. There are three required subtotals—changes in total net assets, changes in net assets with donor restrictions, and changes in net assets without donor restrictions. Similar to for-profits, activities that are related to its ongoing purpose are treated as revenue and recognized gross whereas transactions that are incidental to the NFP are reported as gains or losses and reported net.

Although FASB does not prescribe the format for the statement of activities, many organizations use a columnar approach to present the change in the various net asset classes. As such, presenting comparative financial statements can be very burdensome. Therefore, some NFPs choose to present summarized financial statements. They will have a column for net assets without donor restrictions and net assets with donor restrictions, as well as a final column for the total of all net asset classes. The prior year will then show only the total ...