Using a previous selected NFP CAFR or another NFP CAFR you are interested in, what significant way does this not-for-profit account for investments differently from businesses? How are the investments reflected in the statements of the not-for-profit? What are the disclosure requirements for this not-for-profit as related to investments?
Answered Essay: Using a previous selected NFP CAFR or another NFP CAFR you are interested in, what significant
Expert Answer
| As per Statement of Financial Accounting Standards No. 124 , investments of Not for profit (NFP) are to be recorded, valued and disclosed in the Comprehensive Annual Financial Report (CAFR) as follows |
| A. Investment of unrestricted funds are made to earn additional income until such time as the funds are to be used for program or other purposes. |
| B. Investments of “endowment” and “other restricted funds,” may have been purchased by, or donated to, the organization. |
| C. “Marketable equity securities” should be reported in separate portfolios for “unrestricted current,” “unrestricted noncurrent,” “restricted current” and “restricted noncurrent assets,” but may be pooled for investment purposes, if gains and losses are equitable allocated to both “realized” and “unrealized” gains and losses |
| D. Basis of Valuation |
| 1. Investments purchased should be recorded at cost, which includes brokerage, fees, taxes, and other charges directly applicable to the purchase. |
| 2. Securities donated to the organization should be recorded at their fair market value at the date of the gift. The gains are unrestricted if the investment income is unrestricted or temporarily restricted. |
| 3. The carrying value of investments at (fair) market value is now required by FAS124. |
| 4. The basis of carrying investments should be the same in all funds. |
