Questions on FASB Statement 117
1. What are the three classifications of net assets established by FASB Statement 117? 2. How are these net assets affected by the existence or absence of donor-imposed restrictions? 3. How are releases of these net assets accomplished?
1. The three classifications of net assets established by FASB Statement 117 are: unrestricted assets, temporarily restricted assets, and permanently restricted assets.
2. The existence or absence of donor-imposed restrictions play a large part in how assets are classified on the statement of financial position. If there are no restrictions stipulated by the donor when the assets are contributed to the not-for-profit organization then they will be classified as “unrestricted.” If there is a time or purpose restriction on the assets, then they will go into the “temporarily restricted” section. Lastly, if assets are contributed as part of a structured trust or endowment, then these assets would be classified as “permanently restricted,” due to the fact that the principal value must always remain invested.
3. Unrestricted assets do not need to be released as there are no donor stipulations on them, temporarily restricted assets are released when the organization incurred expenses that satisfied the donor’s stipulations, and permanent assets are never released.
FASB statement 117 establishes that net assets be classified in three distinct categories: unrestricted, temporarily restricted and permanently restricted. The classification of the net asset is directly affected by the existence or absence of donor-imposed restrictions because the donor is the one who determines the classification of the net asset. The donor will state what the assets will be used for and when will the assets be used. The release of the net assets is accomplished when the nonprofit organizations accomplishes the restricted activity which the donor has provided the assets for. When the organization incurs the expenses to satisfy the donor's
1. The three classifications of net assets established by FASB Statement 117 are: unrestricted assets, temporarily restricted assets, and permanently restricted assets.
2. The existence or absence of donor-imposed restrictions play a large part in how assets are classified on the statement of financial position. If there are no restrictions stipulated by the donor when the assets are contributed to the not-for-profit organization then they will be classified as “unrestricted.” If there is a time or purpose restriction on the assets, then they will go into the “temporarily restricted” section. Lastly, if assets are contributed as part of a structured trust or endowment, then these assets would be classified as “permanently restricted,” due to the fact that the principal value must always remain invested.
3. Unrestricted assets do not need to be released as there are no donor stipulations on them, temporarily restricted assets are released when the organization incurred expenses that satisfied the donor’s stipulations, and permanent assets are never released.
FASB statement 117 establishes that net assets be classified in three distinct categories: unrestricted, temporarily restricted and permanently restricted. The classification of the net asset is directly affected by the existence or absence of donor-imposed restrictions because the donor is the one who determines the classification of the net asset. The donor will state what the assets will be used for and when will the assets be used. The release of the net assets is accomplished when the nonprofit organizations accomplishes the restricted activity which the donor has provided the assets for. When the organization incurs the expenses to satisfy the donor's