Accounting and Reporting for Not-for-Profit Organizations

Case Study 4

Note Disclosures

Learning objectives

• Identify “real world” applications of several common footnote disclosures.
• Recognize the use of fair value, pledges receivable, and contributed services in the financial statements.

Discussion

The term disclosure includes everything in the financial statements. Statement captions, titles, and classifications are all disclosures. In addition, financial statements are not complete without note disclosures. (The auditor’s report covers all disclosures, including those in the notes to the financial statements.) Some elements of disclosure may be either embodied in the principal statements or presented in notes—depending on convenience of space.

Why is disclosure important? Generally accepted accounting principles (GAAP) require adequate disclosure. Auditors evaluate disclosures before issuing their opinions on the financial statements. Although the need to provide additional disclosures in notes regarding a particular line in the statements may sometimes require judgment, most required disclosures have been promulgated in Sections 45 and 50 of each topic in the FASB Accounting Standards Codification^® (ASC). A “Significant Accounting Policies” note is used for the purpose of disclosing specific accounting principles and the methods of applying those principles that are judged by management to be most appropriate to present fairly financial position, cash flows, and results of operations.

FASB Accounting Standards Update (ASU) ...