Operating Versus Non-operating
- Identify the definition of the term operations to write a note of disclosure for a statement of activities.
- Identify the proper classifications of items as operating or non-operating in a statement of activities.
FASB Accounting Standards Codification® (ASC) does not prescribe a format for the statement of activities. Although the two net asset classes are required, additional classifications are permitted within a statement of activities. Some entities use operating and non-operating, while others use expendable and nonexpendable. If an NFP voluntarily displays an intermediate measure of operations, such as an excess or deficit of operating revenues over expenses, they must include a note that describes how the entity determined the measure of operations and what items are excluded from operations if the NFP’s use of the term operations is not apparent from the details provided on the face of the statement.
There are some limitations on the use of an intermediate measure of operations by other sections of FASB ASC. If a subtotal such as income from operations is presented, it should include the following amounts:
- An impairment loss recognized for a long-lived asset (or asset group) to be held and used pursuant to FASB ASC 360-10-45-4
- Any gain or loss recognized on the sale of a long-lived asset (or disposal group) if that asset (or group) is not a component of the NFP pursuant to FASB ASC 360-10-45-5 ...