The Requirements of Sfas

The Requirements of SFAS 116 and 117 and its effect on the financial statements The Statement of Financial Accounting Standards (SFAS) 116 and 117 are standards set for not- for-profit and non-governmental entities. The standards report card for contributions and financial statement presentation (Granof, Khumawala, 2011). SFAS 116 defines how contributions are designated. Contributions can have donor-imposed restrictions.The standard defines three types of designations 1. Permanently restricted The addition is specific by the donor, the principal is permanently restricted, but the income is available for use. 2. Temporarily restricted The asset is restricted by purpose and eon. The donor places the restrictions on the asset. The donor may request the asset be used for a specified purpose or time once the purpose or time has been fulfilled restriction is lifted. 3.Unrestricted If the donor does not place any restrictions on the asset the asset is unrestricted. SFAS 117 clarifie s the reporting of contributions for not-for-profit organizations on their financial statements. The standard requires three financial statements for not-for-profit entities 1. Statement of Financial Position essentially a Balance Sheet 2. Statement of Activities SFAS 117 directs the revenues and expenses on the statement of activities focus on the organization as a whole versus individual funds.Gains and losses recognized on investments must be broken emerge from other assets. 3. Statement of Cash Flows Not-for-profit organizations need to be familiar with the changes that relate to SFAS 116 and 117 to be in residency and to ensure the organization is reporting contributions correctly. References Granof, Michael H. , Khumawala, Saleha B. , (2011). Government and Not-For-Profit Accounting (5th ed. ). River City, NJ John Wiley & Sons, Inc.