ACC 460 rewrite it

The not revenue driven association are known for not to gain cash for benefit but rather the requirements of the network. The not revenue driven association that the group will break down is The Habitat for Humanity. This association is focused on aiding more than 20 million individuals with the structure or improving family homes for the network. The group will assess on the chose not for benefit budget summaries fit in with Financial Accounting Standards Board, the look at the association revealing of promises and commitments to its announcing of trade exchanges, and clarifying the effect if Habitat for Humanity presents abundance monetary advantages on precluded people.

The financial states for Habitat for Humanity are easily accessible on their website and conform with the Financial Accounting Standards Board (FASB) guidance in Statement NO. 117, Financial Statements of Not-for-Profit Organizations perfectly. According to the statement, it “requires that all not-for-profit organizations provide a statement of financial position, a statement of activities, and a statement of cash flows” which are all available for this particular NFP. This statement also requires that Habitat for Humanity classifies their net assets, revenues, expenses, gains and losses that are based on their donor-imposed restrictions, displays all three classes of net assets, and that they expand their statement of cash flows to include donor-restricted cash that is used for long-term purposes. Habitat for Humanity has executed all of these requirements in their financial statements by issuing a Statement of Activities that states their net assets at the end of 2018 were $230,624,227. This total is broken down into $97,459,334 of unrestricted; $130,594,965 of Temporarily Restricted; and $2,569,928 of Permanently Restricted. They also provided a Statement of Cash Flows that include certain donor-restricted cash that must be used for long-term purposes. All-in-all, Habitat for Humanity’s financial statements conform nicely with the requirements of Statement No. 117.

A contribution is “a voluntary, unconditional, and nonreciprocal transfer of cash or other assets to an NFP” (Lowensohn, Reck, &Wilson, 2015). Habitat for Humanity and other voluntary health and welfare organizations are dependent on these revenues. On the other hand, an exchange transaction occurs when the other party to the transaction is presumed to receive direct tangible benefit equal with the resources provided.

The Habitat for Humanity’s notes to the financial statements contains a description to explain how they record contributions. First, all revenue is recognized when the “underlying promises” are received by Habitat (Habitat, 2018). For instance, if there are donor stipulations as to the time or purpose, the gifts of cash or other assets are categorized as a temporarily restricted contribution. When the donor restriction expires, temporarily restricted net assets are reclassified as unrestricted assets. Contributions also take form of capital assets, materials, and services. However, for Habitat for Humanity, like most NFPs, the value of contributed time of a service is only included in the consolidated financial statements if it requires a specialized skill that would otherwise need to be purchased. In that case it would be recognized as a revenue or expense.

Contributions are easily located in the financial statements, as a category under revenue. Conversely, exchange transactions are not specifically mentioned once. Contributions and exchange transactions are often hard to decipher. The major difference is “not-for-profits recognize contributions upon receipt, and exchange transactions either at a point in time or over time based on facts and circumstances” (Tysiac, 2017). Therefore, if one cannot determine from the revenue recognition it is best to consult an auditor.

For Habitat for Humanity, one can conclude that the governmental grants are exchange transactions. “Government grants are generally treated as exchange transactions due to the common practice of governments purchasing goods or services for a particular population or the general public” (Moyer, 2017). Based on the information provided in the notes to the financial statement which tells its readers, “Grant revenue on cost-reimbursement grants is recognized after the program expenditures have been incurred (Habitat)”. In other words, the grant revenue is recognized after completing the project per request of the government. Moreover, the government is receiving a benefit off this grant, making it an exchange transaction. Also, another indication is government grants are not included in the contributions total. Overall, for Habitat for Humanity contributions and exchange transactions are included in the statement of activities.

Disqualified person is any person who was in a position to exercise substantial influence over the affairs of the applicable tax-exempt organization at any time during the lookback period. ... Family members of the disqualified person and entities controlled by the disqualified person are also disqualified persons "Intermediate Sanctions - Excess Benefit Transactions", 2018)

An excess benefit transaction is a transaction in which an economic benefit is provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of a disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration received by the and the value of the economic benefit provided by the organization exceeds the value of the consideration received by the organization ("Intermediate Sanctions - Excess Benefit Transactions", 2018).

According to their Return of Organization Exempt from Income Tax Extended to May 2019. In Section 25 a. and 25 b. There were no non-economic benefits from not-for-profit that confers with excess economic benefits on disqualified persons. The HABITAT FOR HUMANITY OF GREATER CINCINNATI. ("Form 990", 2017).

The budgetary revealing for not profit driven substances has various contrasts when contrasted with announcing for the benefit and different sorts of elements. Through dissecting a not for benefit budget reports. The Habitat for Humanity one can perceive how FASB direction in Statement No. 117 influences monetary revealing. The distinction between their announcing of commitments and trade exchanges.

Reference

Habitat for Humanity International. (2018, June 30). Consolidated Financial Statements and Report of Independent Certified Public Accountants and Single Audit Reports. Retrieved from https://www.habitat.org/about/annual-reports-990s

Lowensohn, S., Reck, J., & Wilson, E. (2015). Accounting for Governmental & Nonprofit Entities. (17th ed.). Retrieved from University of Phoenix eBook Collection.

Moyer, Danielle. (2017). Grants: Exchange Transactions vs. Contributions. Retrieved from https://www.wegnercpas.com/grants-exchange-transaction-vs-contribution/

Tysiac, Ken. (2017, March 1). Get Revenue Recognition Right at Not-for-Profits. Retrieved from https://www.journalofaccountancy.com/issues/2017/mar/revenue-recognition-at-not-for-profits.html

Intermediate sanctions - excess benefit transactions (2018). Retrieved from https://www.irs.gov/charities-non-profits/charitable-organizations/intermediate-sanctions-excess-benefit-transactions

Form 990(2017). Retrieved from http://file:///C:/Users/ruth/Downloads/FY18%20990%20public%20copy.pdf

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