# ASC 205-958-55: Presentation of Financial Statements — Not-for-Profit Entities — 55 Implementation Guidance and Illustrations

Source: FASB Accounting Standards Codification, Basic View

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## ASC 205-958-55: 55 Implementation Guidance and Illustrations

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#### Implementation Guidance

##### [205-958-55-1](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-1)

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This paragraph provides implementation guidance on the application of paragraphs

[958-205-45-13C through 45-13F](https://asc.understandingaccounting.org/asc/205/958/#205-958-45-13C)

. Enacted versions of the Uniform Prudent Management of Institutional Funds Act of 2006 vary across jurisdictions, so a [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) would have to assess the specific law applicable to its operations for guidance. Other sources that may be helpful in that assessment could include discussion that occurred in the legislative committees leading to the law adopted in a particular state, announcements from the state attorney general, a consensus of learned lawyers in the state, or similar information. In the absence of new legislation, clarifying court decisions, additional guidance issued by the state attorney general, or similar developments, the governing board's interpretation of the relevant law shall be consistent from year to year.

#### Illustrations

##### [205-958-55-1A](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-1A)

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This Section, which is an integral part of the requirements of this Subtopic, provides general guidance to be used in the presentation of a full set of financial statements, including certain notes to the financial statements, by an NFP.

##### [205-958-55-2](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-2)

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This Example provides illustrations of statements of financial position, statements of activities, statements of cash flows, and selected notes to the financial statements for Not-for-Profit Entity A. The terms _statement of financial position_ and _statement of activities_ indicate the content and purpose of the respective statements and serve as possible titles for those statements. Other appropriately descriptive titles may also be used. For example, a statement reporting financial position could be called a balance sheet. Current practice and the statement's purpose suggest, however, that a statement of cash flows only be titled statement of cash flows. These illustrations are intended as examples only; they present only a few of the permissible formats. Other formats or levels of detail may be appropriate for certain circumstances. For example, a schedule of expenses by nature and function is illustrated in the notes to the financial statements but also may be presented on the face of the statement of activities or as a separate statement. Not-for-profit entities (NFPs) are encouraged to provide information in ways that are most relevant and understandable to donors, creditors, and other external users of financial statements. NFPs typically provide comparative financial statements; however, for simplicity, the illustrative statements of activities and statements of cash flows provide information for a single period.

##### [205-958-55-3](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-3)

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The illustrations also include certain notes to financial statements for matters discussed in Subtopics 958-210, 958-220, and 958-230. The illustrative notes are not intended to illustrate compliance with all generally accepted accounting principles (GAAP) and specialized accounting and reporting principles and practices.

##### [205-958-55-4](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-4)

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Shading is used to highlight certain basic totals that must be reported in financial statements to comply with the provisions of Subtopics 958-210, 958-220, and 958-230. Together they require not only reporting those certain basic totals but also reporting components of those aggregates; for example, they require reporting information about the gross amounts of items of revenues and expenses and cash receipts and payments.

##### [205-958-55-5](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-5)

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The following facts and transactions are reflected in the illustrative financial statements in Example 1. The transactions are presented by class of net assets to facilitate locating their effects in the statements and notes. The transactions in (a) through (hh) affect [net assets without donor restrictions](https://asc.understandingaccounting.org/glossary/n/#net-assets-without-donor-restrictions "The part of net assets of a not-for-profit entity that is not subject to donor-imposed restrictions (donors include other types of contributors, including makers of certain grants)."). The transactions in (i) through (n), (s), (t), and (w) affect [net assets with donor restrictions](https://asc.understandingaccounting.org/glossary/n/#net-assets-with-donor-restrictions "The part of net assets of a not-for-profit entity that is subject to donor-imposed restrictions (donors include other types of contributors, including makers of certain grants)."). The transactions in (hhh), (o) through (r), and (u) affect both classes of net assets.

1.  a
    
    Not-for-Profit Entity A invested cash in excess of daily requirements in short-term investment instruments. Interest earned on these investments totaled $850, which is included in the net investment return on the statement of activities. The governing board previously designated a portion of net assets without donor restrictions for long-term investment (quasi-endowment). Those assets earned $5,800, comprising $2,000 of dividends, interest, and rents and $3,800 of realized and unrealized net gains.
    
2.  b
    
    Not-for-Profit Entity A received [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") without donor restrictions of the following: cash, $5,120; recognizable contributed services, $300; other consumable assets, $1,410; equipment, $140; and [unconditional promises to give](https://asc.understandingaccounting.org/glossary/u/#unconditional-promise-to-give "A promise to give that depends only on passage of time or demand by the promisee for performance.") to support activities of 20X1, $1,020.
    
3.  c
    
    Equipment with an original cost of $660 and accumulated depreciation of $330 was destroyed in a fire. Insurance proceeds of $250 were received. The equipment was originally purchased with assets without associated donor restrictions.
    
4.  d
    
    All conditions of a prior year's grant of $650 were substantially met. The grant proceeds were originally recorded as a refundable advance.
    
5.  e
    
    Not-for-Profit Entity A made a payment of $425 on its prior year unconditional grant to an unrelated agency.
    
6.  f
    
    Not-for-Profit Entity A repaid $1,140 of its notes payable. Interest of $32 was incurred and paid on these notes.
    
7.  g
    
    Not-for-Profit Entity A repaid $1,000 of its long-term debt. Interest of $350 was incurred and paid on the debt.
    
8.  h
    
    Depreciation amounted to $3,200.
    
9.  hh
    
    Not-for-Profit Entity A sold equipment that was fully depreciated for $200.
    
10.  hhh
     
     Not-for-Profit Entity A's financial assets consisted of cash and cash equivalents, short-term investments, accounts and interest receivable, contributions receivable, assets restricted to investment in land, buildings, and equipment, and long-term investments. The $193,490 of donor-restricted net assets included the net assets resulting from contributions receivable of $1,000, which were without purpose restrictions and were due within one year. The remaining amounts of contributions receivable were either purpose-restricted or due in greater than one year. In addition, amounts made unavailable by the governing board included $36,600 of board-designated long-term investments. The $1,300 liquidity reserve, created in a prior year when the governing board designated net assets without donor restrictions, was included as a reconciling item in Not-for-Profit Entity A's note on liquidity risk and the availability of resources because the intention of the designation was to support unanticipated liquidity needs and not general expenditures.
     
11.  i
     
     Not-for-Profit Entity A received contributions with donor restrictions as follows.
     
     -   ![](https://asc.understandingaccounting.org/asc-img/GUID-4679A91B-E002-41EF-BEDC-19A41DCF6FAC-low.gif)
         
         Restricted to: Cash Consumable Assets Promises to Give Program purposes " $2,170 " $960 $920 Use in future periods 740 1000 "Acquisition of land, buildings, and equipment" 770 " 1,380 "
         
12.  ii
     
     The composition of assets restricted to investment in land, buildings, and equipment as of June 30, 20X1, and 20X0, is shown below. The change in restricted cash below represents a purchase of investments restricted to investment in land, buildings, and equipment.
     
     -   ![](https://asc.understandingaccounting.org/asc-img/GUID-5B6EE151-81F3-4FE2-9175-8429835A9D53-low.gif)
         
         6/30/20X1 6/30/20X0 Restricted cash $60 $160 Contributions receivable " 2,440 " " 1,500 " Investments " 2,710 " " 2,900 " " $5,210 " " $4,560 "
         
13.  j
     
     In addition, a donor transferred cash of $200 to set up an [annuity trust](https://asc.understandingaccounting.org/glossary/a/#annuity-trust "See Charitable Remainder Trust.") having a related annuity obligation with a present value of $100. Upon the death of the beneficiary, the remaining interest will be used for a donor-restricted purpose.
     
14.  k
     
     In addition, a donor contributed cash of $70 to create a [term endowment](https://asc.understandingaccounting.org/glossary/t/#term-endowment "An endowment fund established to provide income for a specified period. See Endowment Fund."). At the end of 15 years the endowment assets can be used to support Not-for-Profit Entity A's operations.
     
15.  l
     
     Not-for-Profit Entity A made payments of $145 to beneficiaries of annuity trust agreements.
     
16.  m
     
     A donor contributed a paid-up life insurance policy with a cash surrender value of $80. Upon the death of the insured, the death benefit must be used to create a [donor-restricted endowment fund](https://asc.understandingaccounting.org/glossary/d/#donor-restricted-endowment-fund "An endowment fund that is created by a donor stipulation (donors include other types of contributors, including makers of certain grants) requiring investment of the gift in perpetuity or for a specified term. Some donors or laws may require that a portion of income, gains, or both be added to the gift and invested subject to similar restrictions. The term does not include a Board-Designated Endowment Fund. See Endowment Fund."). There was no change in the cash surrender value between the date of the gift and the end of the fiscal year.
     
17.  n
     
     A donor contributed cash of $200 to create a donor-restricted endowment fund. The income is restricted to use for Program A activities.
     
18.  o
     
     Not-for-Profit Entity A collected [promises to give](https://asc.understandingaccounting.org/glossary/p/#promise-to-give "A written or oral agreement to contribute cash or other assets to another entity. A promise carries rights and obligations—the recipient of a promise to give has a right to expect that the promised assets will be transferred in the future, and the maker has a social and moral obligation, and generally a legal obligation, to make the promised transfer. A promise to give may be either conditional or unconditional.") of $3,055: $980 of amounts for general purposes, $610 of amounts restricted to future periods, $1,025 of amounts restricted to program purposes, and $440 of amounts for acquisition of land, buildings, and equipment.
     
19.  p
     
     Not-for-Profit Entity A utilized all of the $1,410 consumable assets contributed for general purposes, and $350 of the $960 consumable assets contributed for program purposes.
     
20.  q
     
     A trust annuitant died and the $400 [remainder interest](https://asc.understandingaccounting.org/glossary/r/#remainder-interest "The right to receive all or a portion of the assets of a split-interest agreement remaining at the end of the agreement's term.") became available for the general use of Not-for-Profit Entity A. Management decided to invest the remainder interest in short-term investments. The actuarial gain on death of the annuitant is included in the actuarial loss on annuity obligations.
     
21.  r
     
     Not-for-Profit Entity A acquired and placed in service $1,500 of equipment for Program A; net assets with donor restrictions were available at the time the equipment was purchased.
     
22.  s
     
     Net investment return of $18,000 was earned from the pooled donor-restricted endowment. This comprised $12,000 of realized and unrealized net gains and $6,000 of interest and dividends. Additionally, $300 of interest and dividends was earned from separately invested donor-restricted endowment funds and annuity trust assets, which are required to be reinvested. The original endowment gift amount as adjusted to the level required by donor stipulations or by law that extends donor restrictions was $122,337.
     
23.  t
     
     Not-for-Profit Entity A reinvested the yield of $120 on a donor-restricted endowment fund that requires income to be added to the original gift until the fund's value is $2,500.
     
24.  u
     
     Not-for-Profit Entity A's governing board appropriated for current operations $7,500 of net assets with donor restrictions from the donor-restricted endowment fund. The full amount appropriated was reclassified to net assets without donor restrictions in the current year because the purpose restrictions on $3,000 of the appropriated amount were met in the current year and there were no purpose restrictions on the remaining $4,500.
     
25.  v
     
     Not-for-Profit Entity A follows an enacted version of [UPMIFA](https://asc.understandingaccounting.org/glossary/u/#upmifa "Uniform Prudent Management of Institutional Funds Act of 2006").
     
26.  w
     
     None of Not-for-Profit Entity A's endowment funds were underwater as of the date of the financial statements.

##### [205-958-55-6](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-6)

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The following illustrates the requirements of Subtopic 958-210. Comparative statements of financial position are provided to facilitate understanding of the statement of activities and the statement of cash flows.

##### [205-958-55-7](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-7)

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A statement of financial position that sequences assets and liabilities based on their relative [liquidity](https://asc.understandingaccounting.org/glossary/l/#liquidity "An asset's or liability's nearness to cash. Donor-imposed restrictions may influence the liquidity or cash flow patterns of certain assets. For example, a donor stipulation that donated cash be used to acquire land and buildings limits an entity's ability to take effective actions to respond to unexpected opportunities or needs, such as emergency disaster relief. On the other hand, some donor-imposed restrictions have little or no influence on cash flow patterns or an entity's financial flexibility. For example, a gift of cash with a donor stipulation that it be used for emergency-relief efforts has a negligible impact on an entity if emergency relief is one of its major ongoing programs.") is presented. For instance, cash and cash equivalents of donor-restricted endowment funds held temporarily until suitable long-term investment opportunities are identified are included in the classification long-term investments. Similarly, cash and [contributions receivable](https://asc.understandingaccounting.org/glossary/c/#contributions-receivable "Contributions receivable are the amounts due, as of the date of the financial statements, to the plan from employers, participants, and other sources of funding (for example, state subsidies or federal grants). They include amounts due pursuant to firm commitments, as well as legal or contractual requirements.") restricted by donors to investment in land, buildings, and equipment are not included with the line items cash and cash equivalents or contributions receivable. Rather, those items are reported as assets restricted to investment in land, buildings, and equipment and are sequenced closer to land, buildings, and equipment. (Pursuant to paragraph [958-210-50-3](https://asc.understandingaccounting.org/asc/210/958/#210-958-50-3), the kind of asset is required to be described in the notes to financial statements because its nature is not clear from the description on the face of the statement of financial position. That note is not illustrated in this Example.) Assets and liabilities also may be arrayed by their relationship to net asset classes, classified as current and noncurrent, or arranged in other ways.

##### [205-958-55-8](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-8)

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For an alternative presentation of the net asset section of a statement of financial position, see Example 1 (paragraph [958-210-55-3](https://asc.understandingaccounting.org/asc/210/958/#210-958-55-3)).

##### [205-958-55-9](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-9)

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The following illustrates a statement of financial position for Not-for-Profit Entity A.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-C1C1957D-5FED-4433-885D-1CD1DCFF0D60-low.gif)
    
    Not-for-Profit Entity A Statements of Financial Position " June 30, 20X1 and 20X0" (in thousands) Assets: 20X1 20X0 Cash and cash equivalents "$4,575 " "$4,960 " Accounts and interest receivable " 2,130 " " 1,670 " Inventories and prepaid expenses 610 " 1,000 " Contributions receivable " 3,025 " " 2,700 " Short-term investments " 1,400 " " 1,000 " "Assets restricted to investment in land, buildings, and equipment" " 5,210 " " 4,560 " "Land, buildings, and equipment" " 61,700 " " 63,590 " Long-term investments " 218,070 " " 203,500 " Total assets "$296,720 " "$282,980 " Liabilities and net assets: Liabilities: Accounts payable " $2,570 " " $1,050 " Refundable advance 650 Grants payable 875 " 1,300 " Notes payable " 1,140 " Annuity trust obligations " 1,685 " " 1,700 " Long-term debt " 5,500 " " 6,500 " Total liabilities " 10,630 " " 12,340 " Net assets: Without donor restrictions (Note DD) "92,600" "84,570" With donor restrictions (Note B) "193,490" "186,070" Total net assets "286,090" "270,640" Total liabilities and net assets "$296,720 " "$282,980 " Note: See paragraph 958-205-55-21 for the notes to financial statements.

##### [205-958-55-10](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-10)

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The following illustrates the requirements of Subtopic 958-220. Three formats of statements of activities are presented. To facilitate comparison of the formats, the same level of aggregation is used in each of the statements of activities. The guidance in Subtopic 958-220 permits flexibility to present information in a number of ways as long as the requirements are met. Each format has certain advantages, as follows:

1.  a
    
    Format A reports information in a single column. That format most easily accommodates presentation of multiyear comparative information.
    
2.  b
    
    Format B reports the same information in columnar (or multicolumn) format with a column for each class of net assets. Use of a total column is optional as long as the change in total net assets is presented in accordance with paragraph [958-210-45-1](https://asc.understandingaccounting.org/asc/210/958/#210-958-45-1). That format makes evident that the effects of expirations on donor restrictions result in [reclassification of net assets](https://asc.understandingaccounting.org/glossary/r/#reclassification-of-net-assets "Simultaneous increase of one class of net assets and decrease of another. A reclassification of net assets usually results from a donor-imposed restriction (donors include other types of contributors, including makers of certain grants) being satisfied or otherwise lapsing."). It also accommodates presentation of aggregated information about contributions and investment return for the entity as a whole. However, care is needed for labels and headings to ensure that they clearly communicate all columns and subtotals.
    
3.  c
    
    Format C reports information in two statements with summary amounts from a statement of revenues, expenses, and other changes in net assets without donor restrictions (Part 1 of 2) and a statement of changes in net assets (Part 2 of 2). Alternative formats for the statement of changes in net assets—a single-column and a multicolumn or columnar—are illustrated. The two-statement format focuses attention first on changes in net assets without donor restrictions. That format may be preferred by membership organizations and other NFPs that view certain transactions and events, including the receipts of donor-restricted revenues and gains from contributions and investment return, as incidental or insignificant to their daily operations.

##### [205-958-55-11](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-11)

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The three illustrative statements of activities show items of revenues and gains first, then expenses, then losses; reclassification of net assets, which must be shown separately, is reported with revenues and gains. Those items could be arranged in other ways and other subtotals may be included. For example, the items may be sequenced using any one of the following sequences:

1.  a
    
    Revenues, expenses, gains and losses, and reclassification of net assets shown last
    
2.  b
    
    Certain revenues, less directly related expenses, followed by a subtotal, then other revenues, other expenses, gains and losses, and reclassification of net assets
    
3.  c
    
    Expenses followed by revenues, gains and losses, and the reclassification of net assets.
    

Although in the illustrative statements of activities, expenses are reported by nature in the single-column format example and by function in the multicolumn format example, expenses may be reported in the statement of activities by either natural classification or functional classification or by both.

##### [205-958-55-12](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-12)

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Effective as of: not established by retrieval timestamps.


The following provide additional illustrations of statements of activities:

1.  a
    
    Example 1 in Subtopic 958-220 (see paragraph [958-220-55-5](https://asc.understandingaccounting.org/asc/220/958/#220-958-55-5)) provides an illustration that shows how items may be sequenced to distinguish between operating and nonoperating activities or to make other distinctions, if desired.
    
2.  b
    
    Example 2 in Subtopic 958-220 (see paragraph [958-220-55-7](https://asc.understandingaccounting.org/asc/220/958/#220-958-55-7)) illustrates the display of an appropriately labeled subtotal for change in a class of net assets before the effects of a discontinued operation.
    
3.  c
    
    Example 3 in Subtopic 958-220 (see paragraph [958-220-55-8](https://asc.understandingaccounting.org/asc/220/958/#220-958-55-8)) provides three possible methods of displaying fundraising efforts in the revenue section of the statement of activities if an NFP acts as an [agent](https://asc.understandingaccounting.org/glossary/a/#agent "An entity that acts for and on behalf of another. Although the term agency has a legal definition, the term is used broadly to encompass not only legal agency, but also the relationships described in Topic 958. A recipient entity acts as an agent for and on behalf of a donor if it receives assets from the donor and agrees to use those assets on behalf of or transfer those assets, the return on investment of those assets, or both to a specified beneficiary. A recipient entity acts as an agent for and on behalf of a beneficiary if it agrees to solicit assets from potential donors specifically for the beneficiary's use and to distribute those assets to the beneficiary. A recipient entity also acts as an agent if a beneficiary can compel the recipient entity to make distributions to it or on its behalf."), [trustee](https://asc.understandingaccounting.org/glossary/t/#trustee "An entity that has a duty to hold and manage assets for the benefit of a specified beneficiary in accordance with a charitable trust agreement. In some states, not-for-profit entities (NFPs) are organized under trust law rather than as corporations. Those NFPs are not trustees as defined because, under those statutes, they hold assets in trust for the community or some other broadly described group, rather than for a specific beneficiary."), or [intermediary](https://asc.understandingaccounting.org/glossary/i/#intermediary "Although in general usage the term intermediary encompasses a broad range of situations in which an entity acts between two or more other parties, in this usage, it refers to situations in which a recipient entity acts as a facilitator for the transfer of assets between a potential donor and a potential beneficiary (donee) but is neither an agent or trustee nor a donee and donor.") in raising resources for another.
    
4.  d
    
    Example 1 in Subtopic 958-320 (see paragraph [958-320-55-4](https://asc.understandingaccounting.org/asc/320/958/#320-958-55-4)) provides an illustration of an NFP that presents:
    
    1.  1
        
        Net investment return
        
    2.  2
        
        Appropriation of funds from the quasi-endowment
        
    3.  3
        
        Appropriation of funds from a donor-restricted endowment fund in which the purpose restrictions on the appropriated amount have been met during the period.

##### [205-958-55-13](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-13)

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Format A (a single-column format) is as follows.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-A7FDD94D-C11D-4056-A79B-DE93B6C69062-low.gif)
    
    Not-for-Profit Entity A Statement of Activities " Year Ended June 30, 20X1" (in thousands) Changes in net assets without donor restrictions: Revenues and gains: Contributions of cash and other financial assets " $6,790 " Contributions of nonfinancial assets " 1,850 " Fees " 5,200 " "Investment return, net" " 6,650 " Gain on sale of equipment 200 Other 150 Total revenues and gains without donor restrictions " 20,840 " Net assets released from restrictions (Note D): Satisfaction of program restrictions " 8,990 " Satisfaction of equipment acquisition restrictions " 1,500 " Expiration of time restrictions " 1,250 " Appropriation from donor endowment and subsequent satisfaction of any related donor restrictions " 7,500 " Total net assets released from restrictions " 19,240 " "Total revenues, gains, and other support without donor restrictions" " 40,080 " Expenses and losses: Salaries and benefits " 15,115 " Grants to other organizations " 4,750 " Supplies and travel " 3,155 " Services and professional fees " 2,840 " Office and occupancy " 2,528 " Depreciation " 3,200 " Interest 382 Total expenses (Note F) " 31,970 " Fire loss on building 80 Total expenses and losses " 32,050 " Increase in net assets without donor restrictions " 8,030 " Changes in net assets with donor restrictions: Contributions of cash and other financial assets " 7,430 " Contributions of nonfinancial assets 960 "Investment return, net" " 18,300 " Actuarial loss on annuity trust obligations (30) Net assets released from restrictions (Note D) " (19,240)" Increase in net assets with donor restrictions " 7,420 " Increase in total net assets " 15,450 " Net assets at beginning of year " 270,640 " Net assets at end of year " $286,090 " Note: See paragraph 958-205-55-21 for the notes to financial statements.

##### [205-958-55-14](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-14)

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Record version: sha256:ee8d155c3bcf3ad2ddc8345100e519088fb5438c8040b74fb019371ed888804a

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Effective as of: not established by retrieval timestamps.


Format B (a multicolumn format) is as follows.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-71A82750-4765-4E46-BDD8-C1E7AC235306-low.gif)
    
    Not-for-Profit Entity A Statement of Activities " Year Ended June 30, 20X1" (in thousands) Without Donor Restrictions With Donor Restrictions Total "Revenues, gains, and other support:" Contributions of cash and other financial assets " $6,790 " " $7,430 " " $14,220 " Contributions of nonfinancial assets " 1,850 " 960 " 2,810 " Fees " 5,200 " " 5,200 " "Investment return, net" " 6,650 " "18,300" " 24,950 " Gain on sale of equipment 200 200 Other 150 150 Net assets released from restrictions (Note D): Satisfaction of program restrictions " 8,990 " " (8,990)" Satisfaction of equipment acquisition restrictions " 1,500 " " (1,500)" Expiration of time restrictions " 1,250 " " (1,250)" Appropriation from donor endowment and subsequent satisfaction of any related donor restrictions " 7,500 " " (7,500)" Total net assets released from restrictions " 19,240 " " (19,240)" - "Total revenues, gains, and other support" " 40,080 " " 7,450 " " 47,530 " Expenses and losses: Program A " 13,296 " " 13,296 " Program B " 8,649 " " 8,649 " Program C " 5,837 " " 5,837 " Management and general " 2,038 " " 2,038 " Fundraising " 2,150 " " 2,150 " Total expenses (Note F) " 31,970 " " 31,970 " Fire loss on building 80 80 Actuarial loss on annuity trust obligations 30 30 Total expenses and losses " 32,050 " 30 " 32,080 " Change in net assets " 8,030 " " 7,420 " " 15,450 " Net assets at beginning of year " 84,570 " " 186,070 " " 270,640 " Net assets at end of year " $92,600 " " $193,490 " " $286,090 " Note: See paragraph 958-205-55-21 for the notes to financial statements.

##### [205-958-55-15](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-15)

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Record version: sha256:51fb0f0e9d8eb6da7e70142f660fffec8ada8b2d6115b39e213ed860b9326e1b

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Format C, Part 1 of 2 is as follows.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-2B4364B1-B339-4DAC-B634-75572ACBFD8B-low.gif)
    
    Not-for-Profit Entity A " Statement of Revenues, Expenses, and" Other Changes in Net Assets without Donor Restrictions " Year Ended June 30, 20X1" (in thousands) Revenues and gains without donor restrictions: Contributions of cash and other financial assets " $6,790 " Contributions of nonfinancial assets " 1,850 " Fees " 5,200 " "Investment return, net" " 6,650 " Gain on sale of equipment 200 Other 150 Total revenues and gains without donor restrictions " 20,840 " Net assets released from restrictions (Note D): Satisfaction of program restrictions " 8,990 " Satisfaction of equipment acquisition restrictions " 1,500 " Expiration of time restrictions " 1,250 " Appropriation from donor endowment and subsequent satisfaction of any related donor restrictions " 7,500 " Total net assets released from restrictions " 19,240 " "Total revenues, gains, and other support without donor restrictions" " 40,080 " Expenses and losses: Program A " 13,296 " Program B " 8,649 " Program C " 5,837 " Management and general " 2,038 " Fundraising " 2,150 " Total expenses (Note F) " 31,970 " Fire loss on building 80 Total expenses and losses without donor restrictions " 32,050 " Increase in net assets without donor restrictions " $8,030 " Note: See paragraph 958-205-55-21 for the notes to financial statements.

##### [205-958-55-16](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-16)

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Effective as of: not established by retrieval timestamps.


Format C, Part 2 of 2 is as follows.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-1C78284C-5B5D-4DFB-90D3-D9F8EA6A96A1-low.gif)
    
    Not-for-Profit Entity A Statement of Changes in Net Assets " Year Ended June 30, 20X1" (in thousands) Net assets without donor restrictions: Total revenues and gains " $20,840 " Net assets released from restrictions (Note D) " 19,240 " Total expenses and losses " (32,050)" Increase in net assets without donor restrictions " 8,030 " Net assets with donor restrictions: Contributions of cash and other financial assets " 7,430 " Contributions of nonfinancial assets 960 "Investment return, net" " 18,300 " Actuarial loss on annuity trust obligations (30) Net assets released from restrictions (Note D) " (19,240)" Increase in net assets with donor restrictions " 7,420 " Increase in net assets " 15,450 " Net assets at beginning of year " 270,640 " Net assets at end of year " $286,090 " Note: See paragraph 958-205-55-21 for the notes to financial statements.

##### [205-958-55-17](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-17)

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Record version: sha256:1f07d3b49f88dae67b98018a7ffc48015ed50231427e02771b2a1da4938331e0

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Format C, Part 2 of 2 (Alternate) is as follows.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-AC102D9C-5D1F-4446-BB36-CCDD8D156EB0-low.gif)
    
    Not-for-Profit Entity A Statement of Changes in Net Assets " Year Ended June 30, 20X1" (in thousands) Without Donor Restrictions With Donor Restrictions Total "Revenues, gains, and other support:" Revenues and gains without donor restrictions " $20,840 " " $20,840 " Revenues and gains with donor restrictions: Contributions of cash and other financial assets " $7,430 " " 7,430 " Contributions of nonfinancial assets 960 960 "Investment return, net" " 18,300 " " 18,300 " Net assets released from restrictions (Note D) " 19,240 " " (19,240)" - "Total revenues, gains, and other support" " 40,080 " " 7,450 " " 47,530 " Expenses and losses: Expenses and losses " 32,050 " " 32,050 " Actuarial loss on annuity trust obligations 30 30 Total expenses and losses " 32,050 " 30 " 32,080 " Change in net assets " 8,030 " " 7,420 " " 15,450 " Net assets at beginning of year " 84,570 " " 186,070 " " 270,640 " Net assets at end of year " $92,600 " " $193,490 " " $286,090 " Note: See paragraph 958-205-55-21 for the notes to financial statements.

##### [205-958-55-18](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-18)

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Record version: sha256:93d6ebddee45ba6800391efbe5481e56ba6aee4c68fcd6fab811373736fb9d2c

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The following illustrates the requirements of Subtopic 958-230. Statements of cash flows are illustrated using both the direct and indirect methods of reporting cash flow from operating activities. An NFP may choose either method of reporting cash flows from operating activities. If the direct method is used, a reconciliation to the indirect method (as illustrated in paragraph [230-10-55-10](https://asc.understandingaccounting.org/asc/230/10/#230-10-55-10)) may be reported but is not required.

##### [205-958-55-19](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-19)

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Record version: sha256:d2f0e95ed0877c57e04b6af2ce00baf4d6cc1a680b8d7587d61c694f76de3fed

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Effective as of: not established by retrieval timestamps.


The direct method is as follows.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-BC065802-7D0E-4C1D-956A-612827D60E1A-low.gif)
    
    Not-for-Profit Entity A Statement of Cash Flows " Year Ended June 30, 20X1" (in thousands) Cash flows from operating activities: Change in net assets " $15,450 " Adjustments to reconcile change in net assets to net cash used by operating activities: Depreciation " 3,200 " Fire loss 80 Actuarial loss on annuity trust obligations 30 Gain on sale of equipment (200) Increase in accounts and interest receivable (460) Decrease in inventories and prepaid expenses 390 Increase in contributions receivable (325) Increase in accounts payable " 1,520 " Decrease in refundable advance (650) Decrease in grants payable (425) Contributions restricted for long-term investment " (2,740)" Realized and unrealized gains on investments " (15,800)" Interest and dividends restricted for reinvestment (300) Net cash used by operating activities (230) Cash flows from investing activities: Purchase of equipment " (1,500)" Proceeds on sale of equipment 200 Insurance proceeds from fire loss on building 250 Proceeds from sale of investments " 76,100 " Purchase of investments "(75,000)" Net cash provided by investing activities 50 Cash flows from financing activities: Proceeds from contributions restricted for: Investment in perpetual endowment 200 Investment in term endowment 70 "Investment in land, buildings, and equipment" " 1,210 " Investment subject to annuity trust agreements 200 " 1,680 " Other financing activities: Interest and dividends restricted for reinvestment 300 Payments of annuity trust obligations (145) Payments on notes payable " (1,140)" Payments on long-term debt " (1,000)" " (1,985)" Net cash used by financing activities (305) "Net decrease in cash, cash equivalents, and restricted cash" (485) "Cash, cash equivalents, and restricted cash at beginning of year" "5,120" "Cash, cash equivalents, and restricted cash at end of year" "$ 4,635" Supplemental data: Noncash investing and financing activities: Gifts of equipment $140 "Gift of paid-up life insurance, cash surrender value" 80 Interest paid 382

##### [205-958-55-20](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-20)

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Source downloaded (UTC): 2026-09-09T22:56:06.531Z to 2026-09-09T22:56:06.531Z

Record version: sha256:735b12fa8cd30a260eae04830a04f1dd153142fa082a314c49b93c50235e868e

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The indirect method is as follows.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-1E92F344-B94C-48B1-AB8A-8C25843E1C18-low.gif)
    
    Not-for-Profit Entity A Statement of Cash Flows " Year Ended June 30, 20X1" (in thousands) Cash flows from operating activities: Change in net assets " $15,450 " Adjustments to reconcile change in net assets to net cash used by operating activities: Depreciation " 3,200 " Fire loss 80 Actuarial loss on annuity trust obligations 30 Gain on sale of equipment (200) Increase in accounts and interest receivable (460) Decrease in inventories and prepaid expenses 390 Increase in contributions receivable (325) Increase in accounts payable " 1,520 " Decrease in refundable advance (650) Decrease in grants payable (425) Contributions restricted for long-term investment " (2,740)" Realized and unrealized gains on investments " (15,800)" Interest and dividends restricted for reinvestment (300) Net cash used by operating activities (230) Cash flows from investing activities: Purchase of equipment " (1,500)" Proceeds on sale of equipment 200 Insurance proceeds from fire loss on building 250 Proceeds from sale of investments " 76,100 " Purchase of investments "(75,000)" Net cash provided by investing activities 50 Cash flows from financing activities: Proceeds from contributions restricted for: Investment in perpetual endowment 200 Investment in term endowment 70 "Investment in land, buildings, and equipment" " 1,210 " Investment subject to annuity trust agreements 200 " 1,680 " Other financing activities: Interest and dividends restricted for reinvestment 300 Payments of annuity trust obligations (145) Payments on notes payable " (1,140)" Payments on long-term debt " (1,000)" " (1,985)" Net cash used by financing activities (305) "Net decrease in cash, cash equivalents, and restricted cash" (485) "Cash, cash equivalents, and restricted cash at beginning of year" "5,120" "Cash, cash equivalents, and restricted cash at end of year" "$ 4,635" Supplemental data: Noncash investing and financing activities: Gifts of equipment $140 "Gift of paid-up life insurance, cash surrender value" 80 Interest paid 382

##### [205-958-55-21](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-21)

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Record version: sha256:42a696b86f632d23d6d24c31ae5c3815d1e7acaa23bb8d6c725417268444d20a

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The following are illustrative notes to financial statements. Note B provides information required by paragraph [958-210-45-9](https://asc.understandingaccounting.org/asc/210/958/#210-958-45-9). Note DD provides information required by paragraph [958-210-45-11](https://asc.understandingaccounting.org/asc/210/958/#210-958-45-11). Note F provides information required by paragraph [958-720-45-15](https://asc.understandingaccounting.org/asc/720/958/#720-958-45-15). Note G provides information required by paragraphs [958-210-45-7(c)](https://asc.understandingaccounting.org/asc/210/958/#210-958-45-7) and [958-210-50-1A](https://asc.understandingaccounting.org/asc/210/958/#210-958-50-1A). Note D and Note E provide information that is useful to users but is not explicitly required. Note H provides information required by paragraphs

[230-10-50-7 through 50-8](https://asc.understandingaccounting.org/asc/230/10/#230-10-50-7)

. Comparative statements of financial position are provided in the illustrative example in paragraph [958-205-55-9](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-9) only to facilitate understanding of the statement of cash flows. For purposes of applying paragraphs

[230-10-50-7 through 50-8](https://asc.understandingaccounting.org/asc/230/10/#230-10-50-7)

to this illustrative example, assume that the year ended June 30, 20X1, is the only period for which a statement of financial position is presented. Additional disclosure examples for contributed nonfinancial assets recognized are illustrated in paragraph [958-605-55-70U](https://asc.understandingaccounting.org/asc/605/958/#605-958-55-70U). Additional endowment disclosure requirements are illustrated in Example 3 included in this Section. All amounts are in thousands.

-   Note B
    
-   Net assets with donor restrictions are restricted for the following purposes or periods.
    
    -   ![](https://asc.understandingaccounting.org/asc-img/GUID-E8568F2A-D0FC-4877-B98E-086214D7671B-low.gif)
        
        Subject to expenditure for specified purpose: Program A activities: Purchase of equipment " $3,060 " Research 950 Educational seminars and publications 240 Program B activities: Disaster relief 745 Educational seminars and publications 280 Program C activities: general 210 Buildings and equipment " 2,150 " Annuity trust agreements for research " 2,815 " " 10,450 " Subject to the passage of time: "For periods after June 30, 20X1" " 3,140 " Subject to NFP spending policy and appropriation: "Investment in perpetuity (including amounts above original gift amount of $122,337), which, once appropriated, is expendable to support:" Program A activities " 33,300 " Program B activities " 15,820 " Program C activities " 16,480 " Any activities of the organization " 109,100 " " 174,700 " Subject to appropriation and expenditure when a specified event occurs: "Endowment requiring income to be added to original gift until fund's value is $2,500" " 2,120 " Paid-up life insurance policy that will provide proceeds upon death of insured for an endowment to support general activities 80 " 2,200 " Not subject to appropriation or expenditure: Land required to be used as a recreation area " 3,000 " Total net assets with donor restrictions " $193,490 "
        
-   Note D
    
-   Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of the passage of time or other events specified by donors.
    
    -   ![](https://asc.understandingaccounting.org/asc-img/GUID-1B7B6BE0-24F0-4CCC-A7EE-80047FB07F3E-low.gif)
        
        Purpose restrictions accomplished: Program A expenses "$4,350 " Program B expenses "3,450" Program C expenses "1,190" "8,990" Program A equipment acquired and placed in service " 1,500 " Time restrictions expired: Passage of specified time 850 Death of annuity beneficiary 400 " 1,250 " Release of appropriated endowment amounts without purpose restrictions "4,500" Release of appropriated endowment amounts with purpose restrictions "3,000" Total restrictions released "$19,240 "
        
-   Note DD
    
-   Not-for-Profit Entity A's governing board has designated, from net assets without donor restrictions of $92,600, net assets for the following purposes as of June 30, 20X1.
    
    -   ![](https://asc.understandingaccounting.org/asc-img/GUID-C114BCD1-9DEC-4B32-AD05-91DACE5BF02F-low.gif)
        
        Quasi-endowment " $36,600 " Liquidity reserve "1,300 " Total " $37,900 "
        
-   Note E
    
-   Investments are carried at fair value, and realized and unrealized gains and losses are reflected within investment return, net, in the statement of activities. Not-for-Profit Entity A invests cash in excess of daily requirements in short-term investments. At June 30, 20X1, $1,400 was invested short term, and during the year short-term investments earned $850. Most long-term investments are held in two investment pools. Pool A is for donor-restricted endowments and the unappropriated net appreciation of those endowments. Pool B is for amounts designated by the board of trustees for long-term investment. Annuity trusts of $4,500, term endowments of $70, and certain donor-restricted endowments of $2,200 are separately invested. Long-term investment activity is reflected in the following table.
    
    -   ![](https://asc.understandingaccounting.org/asc-img/GUID-88446C20-D25B-4E5D-958C-6FA2FAF23B98-low.gif)
        
        Pool A Pool B Other Total Investments at beginning of year " $164,000 " " $32,800 " " $6,700 " " $203,500 " Gifts available for investment: Gifts creating perpetual endowment 200 80 280 Gifts creating term endowments 70 70 Gifts creating annuity trusts 200 200 Amount withdrawn at death of annuitant (400) (400) "Investment return, net" "18,000" "5,800" 300 " 24,100 " Amounts appropriated for current operations " (7,500)" " (2,000)" " (9,500)" Annuity trust income for current and future payments (180) (180) Investments at end of year " $174,700 " " $36,600 " " $6,770 " " $218,070 " Pool A Pool B Other Total Permanently restricted net assets " $136,820 " " $2,200 " " $139,020 " Temporarily restricted net assets " 10,752 " " 4,570 " " 15,322 " Unrestricted net assets " 27,128 " " $36,600 " " 63,728 " " $174,700 " " $36,600 " " $6,770 " " $218,070 "
        
-   Laws and regulations allow the governing board to appropriate so much of an endowment fund as is prudent considering the following relevant factors: the duration and preservation of the endowment fund, the purposes of Not-for-Profit Entity A and the endowment fund, general economic conditions, the possible effect of inflation or deflation, the expected total return from income and the appreciation of investments, Not-for-Profit Entity A's other resources, and Not-for-Profit Entity A's investment policy. Under Not-for-Profit Entity A's endowment spending policy, 5 percent of the average of the fair value at the end of the previous 3 years is appropriated, which was $7,500 for the year ended June 30, 20X1.
    
-   Note F
    
-   The table below presents expenses by both their nature and their function for fiscal year 20X1.
    
    -   ![](https://asc.understandingaccounting.org/asc-img/GUID-F8C0AE7E-C621-4393-BA03-A13463E49F8A-low.gif)
        
        Program Activities Supporting Activities Total Expenses A B C Programs Subtotal Management and General Fund- Supporting Subtotal Raising Salaries and benefits " $7,400 " " $3,900 " " $1,725 " " $13,025 " " $1,130 " $960 " $2,090 " " $15,115 " Grants to other organizations " 2,075 " 750 " 1,925 " " 4,750 " " 4,750 " Supplies and travel 890 " 1,013 " 499 " 2,402 " 213 540 753 " 3,155 " Services and professional fees 160 " 1,490 " 600 " 2,250 " 200 390 590 " 2,840 " Office and occupancy " 1,160 " 600 450 " 2,210 " 218 100 318 " 2,528 " Depreciation " 1,440 " 800 570 " 2,810 " 250 140 390 " 3,200 " Interest 171 96 68 335 27 20 47 382 Total expenses " $13,296 " " $8,649 " " $5,837 " " $27,782 " " $2,038 " " $2,150 " " $4,188 " " $31,970 "
        
-   The financial statements report certain categories of expenses that are attributable to more than one program or supporting function. Therefore, these expenses require allocation on a reasonable basis that is consistently applied. The expenses that are allocated include depreciation, interest, and office and occupancy, which are allocated on a square-footage basis, as well as salaries and benefits, which are allocated on the basis of estimates of time and effort.
    
-   Note G
    
-   The following reflects Not-for-Profit Entity A's financial assets as of the balance sheet date, reduced by amounts not available for general use because of contractual or donor-imposed restrictions within one year of the balance sheet date. Amounts not available include amounts set aside for long-term investing in the quasi-endowment that could be drawn upon if the governing board approves that action. However, amounts already appropriated from either the donor-restricted endowment or quasi-endowment for general expenditure within one year of the balance sheet date have not been subtracted as unavailable.
    
    -   ![](https://asc.understandingaccounting.org/asc-img/GUID-14C5C7FE-1C47-42C5-9480-AFBB3ECDCFE7-low.gif)
        
        "Financial assets, at year-end" " $234,410 " "Less those unavailable for general expenditures within one year, due to: " Contractual or donor-imposed restrictions: Restricted by donor with time or purpose restrictions " (11,940)" Subject to appropriation and satisfaction of donor restrictions " (174,700)" Investments held in annuity trust " (4,500)" Board designations: "Quasi-endowment fund, primarily for long-term investing" " (36,600)" Amounts set aside for liquidity reserve " (1,300)" Financial assets available to meet cash needs for general expenditures within one year " $5,370 "
        
-   Not-for-Profit Entity A is substantially supported by restricted contributions. Because a donor's restriction requires resources to be used in a particular manner or in a future period, Not-for-Profit Entity A must maintain sufficient resources to meet those responsibilities to its donors. Thus, financial assets may not be available for general expenditure within one year. As part of Not-for-Profit Entity A's liquidity management, it has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due. In addition, Not-for-Profit Entity A invests cash in excess of daily requirements in short-term investments. Occasionally, the board designates a portion of any operating surplus to its liquidity reserve, which was $1,300 as of June 30, 20X1. There is a fund established by the governing board that may be drawn upon in the event of financial distress or an immediate liquidity need resulting from events outside the typical life cycle of converting financial assets to cash or settling financial liabilities. In the event of an unanticipated liquidity need, Not-for-Profit Entity A also could draw upon $10,000 of available lines of credit (as further discussed in Note XX) or its quasi-endowment fund.
    
-   Note H
    
-   The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
    
    -   ![](https://asc.understandingaccounting.org/asc-img/GUID-C6A7E29D-B65F-4AAB-8261-D6BAF68BF357-low.gif)
        
        6/30/20X1 Cash and cash equivalents " $4,575 " "Restricted cash included in assets restricted to investment in land, buildings, and equipment" 60 "Total cash, cash equivalents, and restricted cash shown in the statement of cash flows" " $4,635 "
        
-   Assets restricted to investment in land, buildings, and equipment on the statement of financial position include restricted cash received with a donor-imposed restriction that limits use of that cash to long-term purposes.

##### [205-958-55-22](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-22)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-23](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-23)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-24](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-24)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-25](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-25)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-26](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-26)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-27](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-27)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-28](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-28)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-29](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-29)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-30](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-30)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-31](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-31)

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This Example illustrates application of the disclosure guidance in paragraphs

[958-205-50-1A through 50-2](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-1A)

by an NFP (NFP B) subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 even though that disclosure guidance applies whether or not an NFP is subject to an enacted version of that law.

##### [205-958-55-32](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-32)

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This Example makes all of the following assumptions:

1.  a
    
    NFP B is issuing a full set of financial statements for both the current fiscal year, 200Y, and the previous fiscal year, 200X.NFP B is required to disclose the information in paragraph [958-205-50-1B](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-1B) for each period for which it presents financial statements; however, for simplicity, the disclosures provide information for a single period, 200Y.
    
2.  b
    
    NFP B has a sizable endowment.
    
3.  c
    
    Before 200Y, an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 became effective for the State to whose law NFP B is subject.
    
4.  d
    
    [Subparagraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).
    
5.  e
    
    None of the funds have donor stipulations that override the restriction described in subsection 4(a) of the law, which the enacted version in the State included verbatim: "unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution."
    
6.  f
    
    [Subparagraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).
    
7.  g
    
    [Subparagraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-33](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-33)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-34](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-34)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-35](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-35)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-36](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-36)

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The following table contains assumptions about NFP B's endowment-related activities in the year 200Y.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-1A06BD54-AC31-49B3-99E6-6949E5765E68-low.gif)
    
    Board- Donor-Restricted Designated Endowment Endowment Funds Funds Total "Investment return, net(a)" 372 10 382 Contributions to donor-restricted endowment fund " 2,000 " - " 2,000 " Amounts appropriated for expenditure(a) " (7,077)" (373) " (7,450)" Transfer to create board-designated endowment funds - 500 500 Total change in endowment funds " $(4,705)" $137 " $(4,568)" (a) "Included within investment return, net is $125 of 200Y net depreciation that occurred in recent donor-restricted endowment funds, causing the fair value of those funds to be less than the original gift amount. In addition, so as not to suspend certain programs, NFP B's Board deemed it prudent to continue to appropriate $75 to those programs. "

##### [205-958-55-37](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-37)

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NFP B's disclosure of its endowment follows.

-   NOTE X: ENDOWMENT
    
-   NFP B's endowment consists of approximately 100 individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. As required by GAAP, net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.

##### [205-958-55-38](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-38)

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NFP B's disclosure of its interpretation of the law or laws that underlie NFP B's net asset classification of donor-restricted endowment funds follows as required by paragraph [958-205-50-1B(a)](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-1B).

-   Interpretation of Relevant Law
    
-   NFP B is subject to the State Prudent Management of Institutional Funds Act (SPMIFA) and, thus, classifies amounts in its donor-restricted endowment funds as net assets with donor restrictions because those net assets are time restricted until the Board of Trustees appropriates such amounts for expenditure. Most of those net assets also are subject to purpose restrictions that must be met before reclassifying those net assets to net assets without donor restrictions. The Board of Trustees of NFP B has interpreted SPMIFA as not requiring the maintenance of purchasing power of the original gift amount contributed to an endowment fund, unless a donor stipulates the contrary. As a result of this interpretation, when reviewing its donor-restricted endowment funds, NFP B considers a fund to be underwater if the fair value of the fund is less than the sum of (a) the original value of initial and subsequent gift amounts donated to the fund and (b) any accumulations to the fund that are required to be maintained in perpetuity in accordance with the direction of the applicable donor gift instrument. NFP B has interpreted SPMIFA to permit spending from underwater funds in accordance with the prudent measures required under the law.Additionally, in accordance with SPMIFA, NFP B considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:
    
-   (1) The duration and preservation of the fund
    
-   (2) The purposes of the organization and the donor-restricted endowment fund
    
-   (3) General economic conditions
    
-   (4) The possible effect of inflation and deflation
    
-   (5) The expected total return from income and the appreciation of investments
    
-   (6) Other resources of the organization
    
-   (7) The investment policies of NFP B.

##### [205-958-55-39](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-39)

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NFP B's disclosure of its endowment net asset composition by type of fund as of June 30, 200Y, follows as required by paragraph [958-205-50-1B(d)](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-1B).

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-6314D66D-F2C8-4E5E-B7D6-7556ECDEEE05-low.gif)
    
    200Y "Endowment Net Asset Composition by Type of Fund as of June 30, 200Y" Without Donor Restrictions With Donor Restrictions Total Board-designated endowment funds " $7,084 " $- " $7,084 " Donor-restricted endowment funds: Original donor-restricted gift amount and amounts required to be maintained in perpetuity by donor - " 97,759 " " 97,759 " Accumulated investment gains Portion subject to appropriation under SPMIFA - " 35,201 " " 35,201 " Term endowment - " 4,388 " " 4,388 " Total funds " $7,084 " " $137,348 " " $144,432 "

##### [205-958-55-40](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-40)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-41](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-41)

Pending content: no

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NFP B's disclosure of a reconciliation of the beginning and ending balances of the endowment, in total and by net asset classes, for the fiscal year ended June 30, 200Y, follows as required by paragraph [958-205-50-1B(e)](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-1B).

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-BA01B22D-2C93-4660-8E1B-6E36F97F8257-low.gif)
    
    "Changes in Endowment Net Assets for the Fiscal Year Ended June 30, 200Y" Without Donor Restrictions With Donor Restrictions Total "Endowment net assets, beginning of year" " $6,947 " " $142,053 " " $149,000 " "Investment return, net" 10 372 382 Contributions - " 2,000 " " 2,000 " Appropriation of endowment assets for expenditure (373) " (7,077)" " (7,450)" Other changes: Transfers to create board-designated endowment funds 500 - 500 "Endowment net assets, end of year" " $7,084 " " $137,348 " " $144,432 "

##### [205-958-55-42](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-42)

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-43](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-43)

Pending content: no

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[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-44](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-44)

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Record version: sha256:7cb71fb34dc68db43817083cffce3d4eb5e39c16f928470bad5e6f91df99abc7

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-45](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-45)

Pending content: no

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Effective as of: not established by retrieval timestamps.


[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-46](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-46)

Pending content: no

Source downloaded (UTC): 2026-09-09T22:56:06.531Z to 2026-09-09T22:56:06.531Z

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Effective as of: not established by retrieval timestamps.


[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).

##### [205-958-55-47](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-47)

Pending content: no

Source downloaded (UTC): 2026-09-09T22:56:06.531Z to 2026-09-09T22:56:06.531Z

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NFP B's presentation under paragraphs

[958-210-45-9 through 45-10](https://asc.understandingaccounting.org/asc/210/958/#210-958-45-9)

and disclosure under paragraph [958-210-50-3](https://asc.understandingaccounting.org/asc/210/958/#210-958-50-3) follows.

-   ![](https://asc.understandingaccounting.org/asc-img/GUID-C19DFCE4-3A97-428C-BFF4-FDDF729647AE-low.gif)
    
    Description of Amounts Classified as Net Assets with Donor Restrictions (Endowment Only) 200Y Net Assets with Donor Restrictions Original donor-restricted endowment gift amount and amounts required to be retained by donor "$97,759 " Term endowment funds "4,388" Accumulated investment gains on endowment funds Without purpose restrictions " 20,102 " With purpose restrictions " 15,099 " Total endowment funds classified as net assets with donor restrictions "$137,348 "

##### [205-958-55-48](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-48)

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Effective as of: not established by retrieval timestamps.


The illustrative disclosure in the preceding paragraph includes only the net assets with donor restrictions within NFP B's endowment. A typical disclosure would be presented outside an endowment note disclosure and include all of the net assets classified within net assets with donor restrictions.

##### [205-958-55-49](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-49)

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


NFP B's disclosure under paragraph [958-205-50-2](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-2) follows.

-   Underwater Endowment Funds
    
-   From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or SPMIFA requires NFP B to retain as a fund of perpetual duration. Deficiencies of this nature exist in 3 donor-restricted endowment funds, which together have an original gift value of $3,500, a current fair value of $3,300, and a deficiency of $200 as of June 30, 200Y. These deficiencies resulted from unfavorable market fluctuations that occurred shortly after the investment of new contributions for donor-restricted endowment funds and continued appropriation for certain programs that was deemed prudent by the Board of Trustees.

##### [205-958-55-50](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-50)

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Source downloaded (UTC): 2026-09-09T22:56:06.531Z to 2026-09-09T22:56:06.531Z

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


NFP B's disclosure under paragraph [958-205-50-1B(c)(1)](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-1B) follows.

-   Return Objectives and Risk Parameters
    
-   NFP B has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the organization must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to produce results that exceed the price and yield results of the S&P 500 index while assuming a moderate level of investment risk. NFP B expects its endowment funds, over time, to provide an average rate of return of approximately 8 percent annually. Actual returns in any given year may vary from this amount.

##### [205-958-55-51](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-51)

Pending content: no

Source downloaded (UTC): 2026-09-09T22:56:06.531Z to 2026-09-09T22:56:06.531Z

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


NFP B's disclosure under paragraph [958-205-50-1B(c)(3)](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-1B) follows.

-   Strategies Employed for Achieving Objectives
    
-   To satisfy its long-term rate-of-return objectives, NFP B relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). NFP B targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints.

##### [205-958-55-52](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-52)

Pending content: no

Source downloaded (UTC): 2026-09-09T22:56:06.531Z to 2026-09-09T22:56:06.531Z

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


NFP B's disclosure under paragraph [958-205-50-1B(b) and (c)(2)](https://asc.understandingaccounting.org/asc/205/958/#205-958-50-1B) follows.

-   Spending Policy and How the Investment Objectives Relate to Spending Policy
    
-   NFP B has a policy of appropriating for distribution each year 5 percent of its endowment fund's average fair value over the prior 12 quarters through the calendar year-end preceding the fiscal year in which the distribution is planned. In establishing this policy, NFP B considered the long-term expected return on its endowment. Accordingly, over the long term, NFP B expects the current spending policy to allow its endowment to grow at an average of 3 percent annually. NFP B has a policy that permits spending from underwater endowment funds depending on the degree to which the fund is underwater, unless otherwise precluded by donor intent or relevant laws and regulations. The governing board appropriated for expenditure $75 from underwater endowment funds during the year, which represents 3 percent of the 12-quarter moving average, not the 5 percent it generally draws from its endowment.

##### [205-958-55-53](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-53)

Pending content: no

Source downloaded (UTC): 2026-09-09T22:56:06.531Z to 2026-09-09T22:56:06.531Z

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


[Paragraph superseded by Accounting Standards Update No. 2016-14](https://asc.understandingaccounting.org/updates/asu-2016-14/).