ACC 219 Chapter 15 Flashcards

Questions and Answers

What type of college or university must report expenses by both natural classification and functional classification?

Public colleges and universities

Private colleges and universities

Neither private nor public colleges and universities

Both private and public colleges and universities (correct)

GASB accounting and reporting standards applicable to public colleges and universities:

Differ in some significant ways from FASB standards applicable to private colleges and universities (correct)

Permit public colleges and universities to use the AICPA model, which differs substantially from the reporting model used by private colleges and universities subject to FASB jurisdiction

Are now the same as FASB standards to permit comparability between public and private colleges and universities

Permit public colleges and universities to optionally follow FASB standards

Which of the following is not a step in the tuition and fee revenue recognition process for private colleges and universities?

Allocate the performance obligations to the appropriate period (correct)

Determine the transaction price

Identify the contract with the customer

Identify the performance obligations in the contract

A private college would report which of the following assets differently than a public college?

Intangible assets Signup and view all the answers

Cactus College, a small private college, received a research grant from NACUBO. In accordance with FASB standards, the grant would be reported as an increase in:

Net assets with donor restrictions Signup and view all the answers

Which of the following receipts can properly be accounted for as an increase in net assets without donor restrictions by a private college?

Student tuition and fees Signup and view all the answers

It would not make economic sense for a university to accept a split-interest agreement in which a fixed annuity is payable to the donor if:

The present value of the future annuity payments and other liabilities exceed the fair market value of the assets Signup and view all the answers

The FASB requires that private colleges and universities prepare which of the following financial statements?

A statement of activities Signup and view all the answers

Which of the following items would not affect the amounts reported in the Revenues and Gains section of the statement of activities for a private college or university?

Deferred revenues Signup and view all the answers

A college has collected returnable dormitory room deposits from students. How would these deposits be reported by the college?

A current liability Signup and view all the answers

Which of the following is required as part of a complete set of financial statements for a public college or university engaged only in business-type activities?

Statement of revenues, expenses, and changes in net position Signup and view all the answers

Colleges and universities often make loans to students. How would these loans be reported on the financial statements?

A receivable Signup and view all the answers

Which of the following statements is required for both a private university and a governmentally owned public university engaged only in business-type activities?

Statement of cash flows Signup and view all the answers

Tuition scholarships for which there is no intention of performance from the student should be classified by a private university as:

Reductions in the transaction price to arrive at net revenue Signup and view all the answers

Provident City College, a public college, has a 10-week summer session. What amount should it recognize as unrestricted revenue in each of the years ended June 30, 2023, and June 30, 2024?

$100,000 in 2023, $900,000 in 2024 Signup and view all the answers

An alumnus donates securities to a private college. Dividends received from the securities should be recognized as increases in:

Net assets with donor restrictions Signup and view all the answers

What amount of net assets was released from restriction in 2023 for Main University’s cancer research project?

$100,000 Signup and view all the answers

How much had net assets with donor restrictions increased as of the end of FY 2024 for Main University’s cancer research project?

$0 Signup and view all the answers

How would estimated uncollectible tuition and fees be reported on the financial statements of a university?

Both I and III are correct methods of reporting estimated uncollectible tuition and fees Signup and view all the answers

During the year ended June 30, 2023, Thompson College received a federal government grant. Under FASB standards, which option best represents how Thompson College would report this nonexchange transaction?

$0 without donor restrictions, $700,000 with donor restrictions Signup and view all the answers

Which of the following is not a classification of revenues for a college or university as recommended by NACUBO?

Sporting events Signup and view all the answers

State educational appropriations received by a public university are classified as which of the following?

Nonoperating revenue Signup and view all the answers

Which of the following is a typical classification of a functional expense in a college or university?

Institutional support Signup and view all the answers

Which of the following measures may be useful to decision makers evaluating the financial condition of a college or university?

Composite financial index Signup and view all the answers

Which of the following statements about the Uniform Prudent Management of Institutional Funds Act (UPMIFA) is correct?

It allows institutions to release net assets from restrictions if certain criteria are met Signup and view all the answers

Briar State, a public college, provided tuition waivers. What amount would Briar State record as Tuition and Fees Discounts and Allowances?

$300,000 Signup and view all the answers

How would a private college or university report its estimate for uncollectible tuition and fees on its statement of activities?

An expense titled Institutional Support Expense Signup and view all the answers

Which of the following statements concerning the audits of colleges and universities is true?

Both public and private colleges and universities are subject to a single audit if they expend over $750,000 in federal funds in a fiscal year Signup and view all the answers

The composite financial index (CFI), a measure of financial health for colleges and universities, includes which of the following ratios?

All of these ratios are included in the CFI Signup and view all the answers

When compared to private institutions, public institutions generally receive significantly more of their total revenues from which of the following? (Select all that apply)

Research grants Signup and view all the answers

In 1993, the FASB changed the reporting model for private and for-profit colleges and universities making them report more like ______.

Businesses Signup and view all the answers

The ______ requires private colleges and universities to report net assets in the same manner as nongovernmental not-for-profit organizations.

FASB Signup and view all the answers

"Taxing authority," which is the power to assess special taxes on local residents, rests with ______ higher education institutions.

Some public Signup and view all the answers

Which of the following issue guidance on issues for private and public colleges and universities on issues not specifically addressed by FASB and GASB standards? (Select all that apply)

NACUBO's Financial Accounting and Reporting Manual for Higher Education (FARM) Signup and view all the answers

Institutions of higher learning have been dichotomized into what two categories of colleges and universities? (Select all that apply)

Public Signup and view all the answers

Assets that are loanable to students, faculty, and staff of an educational institution are provided by which of the following? (Select all that apply)

Grants Signup and view all the answers

When the FASB changed the reporting model for private and for-profit colleges and universities, the most significant change was which of the following?

The elimination of fund reporting Signup and view all the answers

The FASB requires private colleges and universities to report net assets in the same manner as which of the following?

Nongovernmental not-for-profit organizations Signup and view all the answers

FASB standards require that net assets be classified as ______ when a donor requires that the assets be held in perpetuity, or when they must be held for a certain purpose and cannot be sold.

With donor restrictions Signup and view all the answers

Public higher education institutions that have taxing authority may elect to report as engaged in which of the following? (Select all that apply)

Both governmental and business-type activities Signup and view all the answers

Colleges and universities following a business-type model separately report operating activity from nonoperating activity on the statement of revenues, expenses and changes in net position under ______ standards.

GASB Signup and view all the answers

With the exception of recording any ______ on loan assets, the recording for loan assets is the same under the FASB and GASB standards.

Restrictions Signup and view all the answers

All colleges and universities should recognize revenues on the ______ basis.

Accrual Signup and view all the answers

The ______ has jurisdiction over accounting and financial reporting for public colleges and universities.

GASB Signup and view all the answers

Net assets are separated into without donor restriction and with donor restriction under ______ standards.

FASB Signup and view all the answers

A contra-revenue account, such as Provision for Bad Debts, to account for estimated uncollectible tuition and fees may be used by ______ colleges and universities.

Public Signup and view all the answers

FASB standards require private colleges and universities to prepare a statement of activities in ______.

Either a single step or multistep format Signup and view all the answers

The classification of expenses for colleges and universities can be on which of the following?

Either natural or functional basis Signup and view all the answers

Revenue accounts recommended by NACUBO that are typically used by colleges and universities include which of the following? (Select all that apply)

Contributions Signup and view all the answers

GASB standards applicable to public colleges and universities required a statement of cash flows prepared using which of the following?

The direct method Signup and view all the answers

An identifiable activity for which one or more revenue bonds or other revenue-backed debt instruments are outstanding is called a(n) ______.

Segment Signup and view all the answers

FASB standards require pledges to be recorded at fair value ______.

If they will not be collected in less than a year's time Signup and view all the answers

Using ______ accounts allows for the reporting of net tuition and fees on the financial statements.

Contra Signup and view all the answers

Endowments are in one of which of the following two forms?

Permanent or term Signup and view all the answers

Expense accounts recommended by NACUBO that are typically used by colleges and universities include which of the following? (Select all that apply)

Academic support Signup and view all the answers

Split-interest agreement can be which of the following?

Either revocable or irrevocable Signup and view all the answers

The preparation of the statement of cash flows using either the direct or indirect method is allowed under which of the following?

FASB only Signup and view all the answers

The current act that relates to not-for-profit organizations that manage funds for charitable purposes is which of the following?

Uniform Prudent Management of Investment Funds Act (UPMIFA) Signup and view all the answers

The GASB requires that public institutions that use business-type reporting present segment information ______.

In the notes to the financial statements Signup and view all the answers

The four CFI financial ratios include which of the following? (Select all that apply)

Primary reserve ratio Signup and view all the answers

Student scholarships that reduce the amount of Tuition and Fees Receivable should be recorded as which of the following?

Contra-revenues Signup and view all the answers

A college or university is required to have a "single audit" if it expends ______ or more in federal awards in a given fiscal year.

$750,000 Signup and view all the answers

Donor-restricted resources that are nonexpendable as of the date of reporting and are or can be invested for the purpose of producing income are called ______.

Endowments Signup and view all the answers

Which of the following occurs when a donor enters into an arrangement with the college or university requiring the institution to share the benefits received from the donor's gift with another beneficiary?

Split-interest agreement Signup and view all the answers

Three areas of the Uniform Prudent Management of Investment Funds Act (UPMIFA) of 2006 that are of importance for not-for-profit organizations relate to investments, expenditures and which of the following?

Release or modification of restrictions on net assets Signup and view all the answers

Colleges and universities should only be evaluated on which of the following?

Both financial and nonfinancial information Signup and view all the answers

Most colleges and universities publish audited financial statements.

True Signup and view all the answers

Colleges and universities look to which standard-setting body for GAAP?

It depends on whether the entity is public, private, or for-profit. Signup and view all the answers

Which of the following statements is prepared by both a private and public college or university?

Statement of cash flows Signup and view all the answers

Which of the following is a true statement about tuition revenue in a college or university?

Tuition waivers received as part of compensation should be recorded as an expense by both private and public colleges and universities. Signup and view all the answers

A university expended $2,475,000 on a new parking facility. The transaction was reported as an investing activity on its direct method statement of cash flows. What type of university prepared the statement of cash flows?

Either a for-profit university or a private university. Signup and view all the answers

Last year Zelnick College showed a positive revenue over expenses number for the first time in several years. The college is funded with contributions, grants, two government appropriations (state and local), and tuition and fees. Zelnick College is most likely what type of college?

A public university engaged primarily in business-type activities. Signup and view all the answers

Gresham College is a local private college. When reviewing the college's financial reports, you would expect to see which of the following categories on its statement of financial position?

Net assets with donor restrictions and net assets without donor restrictions. Signup and view all the answers

How would a university account for funds received from an external donor that are to be retained and invested, with the related earnings restricted to the purchase of library books?

Restricted—nonexpendable net position in a public university. Signup and view all the answers

Which of the following statements is incorrect concerning the financial reports of colleges and universities?

Intangible assets are reported as a classification within capital assets by private entities. Signup and view all the answers

Many endowment management policies establish a spending rate for the college or university's endowment funds. A spending rate is best defined as:

The portion of the total return that can currently be used to carry out the endowment purpose. Signup and view all the answers

Which of the following is a performance measure of an outcome?

A state survey of employers showed that 70 percent of employers ranked Beasley State University's graduates as 'very well prepared' to enter the workforce. Signup and view all the answers

Which of the following statements is true regarding generally accepted accounting principles (GAAP) for colleges and universities?

The GASB is responsible for establishing GAAP for public colleges and universities. Signup and view all the answers

The most common funds used by private colleges and universities include all of the following except:

Sustainable funds. Signup and view all the answers

Study Notes

Revenue Sources for Higher Education

Public institutions mainly rely on state appropriations for revenue, more so than private institutions.
Private institutions are significant recipients of research grants compared to their public counterparts.

Financial Reporting Standards

The FASB requires private colleges to report similarly to businesses, diverging from traditional practices.
A shift in the reporting model emphasizes net asset classification to align with nongovernmental not-for-profit organizations.
The GASB oversees financial reporting for public colleges and universities.

Taxing Authority

Some public higher education institutions possess "taxing authority," enabling them to levy taxes on local residents.

Guidance on Accounting Standards

The NACUBO provides financial accounting and reporting guidance specifically tailored for higher education entities.

Classification of Institutions

Institutions of higher learning are categorized as public or private institutions.

Financing and Assets

Loanable assets for faculty and students often stem from endowment income, gifts, and grants.

Changes in Reporting Practices

The elimination of fund reporting represents the most impactful change introduced by the FASB for private and for-profit colleges.

Financial Reporting Requirements

Net assets must be classified under specific restrictions based on donor requirements, notably as with donor restrictions or without donor restrictions.

Cash Flows and Reporting Standards

Public colleges and universities using the GASB must prepare cash flow statements utilizing the direct method.

Accounting for Revenue and Expenses

Tuition waivers and estimated uncollectible tuition receivables are treated as contra-revenues or expenses in financial statements.
Colleges may recognize revenues on an accrual basis, aligning with standard accounting principles.

Endowment and Investment Management

Endowments can be categorized as permanent or term, influencing their accounting treatment and expenditure allocation.

Split-interest Agreements

Agreements involving shared benefits from a donor’s gift are termed split-interest agreements, either revocable or irrevocable.

Financial Condition Assessment

Colleges are encouraged to assess both financial and non-financial performance, emphasizing the multidimensional nature of institutional evaluation.

Compliance and Audits

Institutions expending $750,000 or more in federal awards are mandated to undergo a "single audit."

Institutional Types and Reporting

Financial reporting protocols differ, where private colleges report on both natural and functional classifications of expenses, unlike public institutions.

Revenue Recognition Compliance

Private institutions must follow specific revenue recognition steps, but they may not allocate performance obligations to periods.

Unique Financial Assets

Intangible assets may be reported differently by private colleges compared to public institutions, reflecting variations in accounting standards.

Performance Measurement

Evaluative metrics such as job placement rates or employer surveys serve as indicators of educational effectiveness, promoting accountability in revenue-generating institutions.

Summary of Not-for-Profit Governance

The UPMIFA influences financial practices regarding investment management and expenditure for not-for-profit organizations, focusing on maintaining financial sustainability and accountability.

Standards Accountability

The GASB provides guidance specifically for public colleges while the FASB governs private institutions, illustrating the bifurcation in accounting standards that impacts fiscal transparency and operational integrity.### FASB Standards and Reporting
Grants are reported as increases in net assets with donor restrictions according to FASB standards.
Private colleges can account for student tuition and fees as increases in net assets without donor restrictions.

Economic Considerations for Universities

Accepting a split-interest agreement for a fixed annuity is unwise if future payments and liabilities exceed the asset's fair market value.

Financial Statements for Colleges

FASB requires private colleges and universities to prepare a statement of activities, among other financial statements.
Public colleges engaged in business-type activities must include a statement of revenues, expenses, and changes in net position.

College Revenues and Liabilities

Deferred revenues do not affect the Revenues and Gains section in a college’s statement of activities.
Returnable dormitory room deposits should be reported as a current liability.

Scholarships and Revenue Classification

Tuition scholarships without student performance obligations are classified as reductions in transaction price for net revenue.
For Provident City College, recognizing $100,000 as unrestricted revenue for FY 2023 and $900,000 for FY 2024 balances tuition from the summer session.

Donations and Financial Reporting

Dividends from securities held in perpetuity for faculty travel are recognized as increases in net assets with donor restrictions.

Research Funding and Net Assets

During a cancer research project, $100,000 of net assets was released from restriction in FY 2023.
By the end of FY 2024, net assets with donor restrictions did not increase for Main University.

Reporting Uncollectible Receivables

Estimated uncollectible tuition and fees may be reported as an expense by both public and private universities.

Grants and Nonexchange Transactions

Thompson College, receiving a federal grant, would report $700,000 in net assets with donor restrictions while recognizing $100,000 in expenses.

Revenue Classifications and Appropriations

Sporting events are not classified as revenue according to NACUBO recommendations.
State educational appropriations for public universities are considered nonoperating revenue.

Financial Metrics and Compliance

The composite financial index (CFI) monitors financial health using several key ratios, including primary reserve ratio, net operating revenues ratio, and return on net assets ratio.
UPMIFA enables institutions to release restrictions on net assets if specific criteria are met.

Tuition Waivers and Discounts

Briar State recorded $300,000 in Tuition and Fees Discounts and Allowances from awards unrelated to graduate assistant teaching.

Audit Requirements

Both public and private colleges must undergo a single audit if federal expenditures exceed $750,000 in a fiscal year.

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Test your knowledge on Chapter 15 of ACC 219 with these interactive flashcards. Explore key concepts related to public and private institutions, including revenue sources and reporting changes. Perfect for reviewing important material before exams.