Scribd
Upload
86 views3 pages

Chapter 16: Accounting For Colleges and Universities

This document summarizes accounting standards for both public and private colleges and universities. It discusses key differences in how restricted gifts and endowments are treated between governmental accounting standards and FASB standards. It also covers segment reporting requirements and how performance is evaluated for public institutions.

Uploaded by

amhicks727
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
86 views3 pages

Chapter 16: Accounting For Colleges and Universities

This document summarizes accounting standards for both public and private colleges and universities. It discusses key differences in how restricted gifts and endowments are treated between governmental accounting standards and FASB standards. It also covers segment reporting requirements and how performance is evaluated for public institutions.

Uploaded by

amhicks727
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 3

CHAPTER 16: ACCOUNTING FOR COLLEGES AND UNIVERSITIES

Answers to Questions 16.1. Governmentally owned (public) colleges and universities are under the standards-setting jurisdiction o the GA!". GASBS 35# issued in $ovember 1%%%# amends GASBS 34 to e&tend its application to public colleges and universities. 'he inancial reporting model or a public college depends on whether it is engaged in only business-type activities# only governmental-type activities# or both. $ongovernmentally owned (private) colleges and universities are under the jurisdiction o the (A!" and ollow SFAS Nos. 116 and 117# as described in )hapter 1*. +ublic colleges or universities engaged only in business-type activities will report in a manner that is now ,uite similar to a private college or university ollowing (A!" standards. )ompare -llustrations 16-1 through 16. to -llustrations 16-* through 16-6. $et assets that are subject to limitations placed on them by persons or organi0ations outside the institution in none&change transactions are called restricted. 'ypically net assets o a college or university are restricted or research# scholarships and ellowships# loans# department uses# debt service# or ac,uisition o capital assets. -n public colleges and universities restricted net assets are urther distinguished by whether the restriction ma1es the net assets none&pendable or e&pendable. GASBS 33 provides additional guidance in accounting or none&change transactions. 2nder the (A!" standards employed by private colleges and universities# restricted gi ts are recorded as support in the period in which the gi t is made# and then classi ied as to whether the contribution increases temporarily or permanently restricted net assets. As e&penditures are made or the purpose or time period stipulated by the donor# then net assets are 3released rom restrictions4 and treated as an addition to unrestricted net assets o the current period. 16-.. 'he (A!" re,uires that private colleges and universities identi y donor5contributor restrictions on net assets as temporarily restricted or permanently restricted. 'he GA!" does not utili0e the same net asset categories6 however# it does provide that within the restricted category o net assets# public colleges and universities should identi y net assets as none&pendable or e&pendable. $one&pendable net assets are those net assets re,uired to be maintained in perpetuity# thus# are similar to the permanently restricted net asset category used by private colleges. 'he e&pendable net assets include those net assets restricted by e&ternal donors5contributors as to time or purpose (similar to temporarily restricted net assets). -n addition# and unli1e temporarily restricted net assets o private colleges and universities# e&pendable net assets include net assets restricted by creditors# law or regulation. 16.*. 7ndowments are none&pendable gi ts used to produce income or the college or university. 'he gi t is reported as a restricted net asset (generally# none&pendable or public colleges and universities and permanently restricted or private colleges and universities)# with the income generated reported as unrestricted or restricted (temporarily restricted by private colleges and universities)# in accordance with the endowment agreement.

16./.

/16*8*8*9.doc

+age 1 o .

CHAPTER 16: ACCOUNTING FOR COLLEGES AND UNIVERSITIES


2nder a split-interest agreement the college or university and the donor have an interest in the gi t. 'here ore# the college or university records its interest in the gi t as an increase in net assets# and records the donor:s interest in the gi t as a liability. -ncome generated rom the gi t is re,uently paid to the donor under an annuity agreement or li e income agreement or a speci ied period o time6 thus# it generally does not increase the net assets o the college or university. +eriodically# adjustments to the donor:s interest (liability) and the college or university:s interest (net assets) are made to record any actuarial gains or losses related to revised li e e&pectancy and investment returns. -n general# the accounting and reporting re,uirements or a split-interest agreement are more comple& than those or an endowment. 16.;. Agree# in part. GASBS 35 re,uires that public colleges and universities apply GASBS 34 since public colleges and universities are considered special purpose governments. -n both public universities and state and local governments# an endowment re ers to a gi t o resources or which the donor stipulates that the principal remain intact in perpetuity. (or public colleges or universities engaged in both governmental-type and business-type activities# the purpose or which the endowment earnings are to be used will determine whether the endowment is a private<purpose trust und (a iduciary und) or a permanent trust und (a governmental-type und). (or colleges and universities engaged only in business-type activities# a permanent und would not be used. Additionally# recall that a permanent und uses modi ied accrual accounting# while a college or university engaged only in business-type activities would use ull accrual accounting to account or the assets and related income o the endowment.

16-6. =isagree. SFAS No. 116 provides that conditional promises to give depend on the occurrence o a speci ied uture and uncertain event to bind the promissor# and shall not be recogni0ed until the conditions on which they depend are substantially met. )ontributions received and unconditional promises to give must be recogni0ed in the period received and reported as revenue that increases either unrestricted# temporarily restricted# or permanently restricted net assets. Although conditional promises to give are not recogni0ed in the accounts# they should be ade,uately disclosed in the notes to the inancial statements. 16->. )ontributions o collection items must be recogni0ed and reported at air value unless all o the ollowing conditions are met? (1) 'hey are held or public e&hibition# education# or research in urtherance o public service rather than inancial gain. (/) 'hey are protected# 1ept unencumbered# cared or# and preserved. (.) 'hey are subject to an organi0ational policy that re,uires the proceeds rom sales o collection items to be used to ac,uire other items or collections. 16-8. +rivate colleges and universities are re,uired to present a statement o inancial position (i.e.# balance sheet)# a statement o activities# and a statement o cash lows. (A!" allows considerable discretion in presenting these statements.

/16*8*8*9.doc

+age / o .

CHAPTER 16: ACCOUNTING FOR COLLEGES AND UNIVERSITIES


GASBS 35 re,uires that public colleges and universities engaged only in business-type activities present a statement o net assets6 statement o revenues# e&penses# and changes in net assets6 and a statement o cash lows. +ublic colleges and universities engaged in both business-type activities and governmental-type activities present two entity-wide statements (statement o net assets and statement o activities)# and several und statements? balance sheet or governmental unds6 statement o revenues# e&penditures and changes in und balances or governmental unds6 statement o proprietary net assets6 statement o revenues# e&penses# and changes in proprietary und net assets6 and statement o cash lows or proprietary unds. 16-%. SFAS 131 speci ically e&empts not- or-pro it organi0ations rom segment reporting6 there ore# private colleges and universities would not report segments. GASBS 34/35 re,uires that colleges or universities using business-type reporting# report segments using condensed statements o net assets6 revenues# e&penses and changes in net assets6 and cash low. A segment is de ined as identi iable activity or which one or more revenue bonds or other revenue-bac1ed debts are outstanding. 16-19. 'he inancial community evaluates the viability# return on 3investment#4 and leverage o public colleges and universities that issue ta&-e&empt debt as measures o inancial per ormance. $on inancial measures that can be used include aculty productivity# number o graduates# satis action o alumni# or job placements. @ost in ormative or users# would be outcome measures o the 3value added4 to the student through the educational process. 'hese measures would include items such as pre-and post-test assessment o the 1nowledge and s1ills that ma1e up the institution:s educational goals. !olutions to 7&ercises and +roblems 16-1. 1. /. .. *. ;. c. d. c. c. b. 6. >. 8. %. 19. d. a. d. ($ote b) b. a.

$ote b? 'here may be situations where the 3assets4 themselves are restricted and must be placed in separate accounts in addition to 3restricted net assets4 but this is not always the case.

/16*8*8*9.doc

+age . o .

You might also like