Not-for-profit entities : March 1, 2017

676 Pages·2017·18.074 MB·English

A u d i t & A c c o u n t i n g
G U I D E
MARCH 1, 2017
Not-for-Profit
Entities
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Copyright © 2017 by
American Institute of Certified Public Accountants, Inc.
New York, NY 10036-8775
All rights reserved. For information about the procedure for requesting permission to
make copies of any part of this work, please e-mail [email protected] with your
request. Otherwise, requests should be written and mailed to the Permissions
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ISBN 978-1-94549-854-1
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iii
Preface
(UpdatedasofMarch1,2017)
ThisguidewaspreparedbytheNot-For-ProfitOrganizationsCommittee.
About AICPA Guides
ThisAICPAGuidehasbeendevelopedbytheAICPANot-for-ProfitEntitiesEx-
pertPanelandGuideTaskForcetoassistmanagementofnot-for-profitentities
(NFPs)inthepreparationoftheirfinancialstatementsinconformitywithU.S.
generallyacceptedaccountingprinciples(GAAP)andtoassistpractitionersin
performingandreportingontheirauditengagements.
AICPA Guides may include certain content presented as "Supplement," "Ap-
pendix," or "Exhibit." A supplement is a reproduction,in whole or in part,of
authoritative guidance originally issued by a standard setting body (includ-
ing regulatory bodies) and applicable to entities or engagements within the
purviewofthatstandardsetter,independentoftheauthoritativestatusofthe
applicableAICPAGuide.Bothappendixesandexhibitsareincludedforinfor-
mationalpurposesandhavenoauthoritativestatus.
TheFinancialReportingExecutiveCommittee(FinREC)isthedesignatedse-
niorcommitteeoftheAICPA authorizedtospeakfortheAICPAintheareas
offinancialaccountingandreporting.Thefinancialaccountingandreporting
guidancecontainedinthisguidewasapprovedbytheaffirmativevoteofatleast
two-thirdsofthemembersofFinRECinNovember2012.Conformingchanges
made to the financial accounting and reporting guidance after that vote are
approvedbytheFinRECChair(orhisorherdesignee).Updatesmadetothe
financialaccountingandreportingguidanceinthisguideexceedingthatofcon-
formingchangesareapprovedbytheaffirmativevoteofatleasttwo-thirdsof
themembersofFinREC.
Thisguidedoesthefollowing:
(cid:2)
IdentifiescertainrequirementssetforthintheFASBAccounting
®
(cid:2) StandardsCodification (ASC).
Describes FinREC's understanding of prevalent or sole industry
practiceconcerningcertainissues.Inaddition,thisguidemayin-
dicate that FinREC expresses a preference for the prevalent or
soleindustrypractice,oritmayindicatethatFinRECexpresses
apreferenceforanotherpracticethatisnottheprevalentorsole
industrypractice;alternatively,FinRECmayexpressnoviewon
(cid:2) thematter.
Identifies certain other, but not necessarily all, industry prac-
ticesconcerningcertainaccountingissueswithoutexpressingFin-
(cid:2) REC'sviewsonthem.
Provides guidance that has been supported by FinREC on the
accounting,reporting,or disclosure treatment of transactions or
eventsthatarenotsetforthinFASBASC.
AccountingguidancefornongovernmentalentitiesincludedinanAICPAGuide
isasourceofnonauthoritativeaccountingguidance.Asdiscussedinparagraph
1.13,FASB ASC is the authoritative source of U.S.accounting and reporting
©2017, AICPA AAG-NFP
iv
standardsfornongovernmentalNFPs.Thisguidedoesnotincludeaccounting
guidanceforgovernmentalentities.AICPAmembersshouldbepreparedtojus-
tify departures from GAAP,as discussed in the "Accounting Principles Rule"
(AICPA,ProfessionalStandards,ETsec.1.320.001and2.320.001).
An AICPA Guide containing auditing guidance related to generally accepted
auditingstandards(GAAS)isrecognizedasaninterpretivepublicationasde-
fined in AU-C section 200,Overall Objectives of the Independent Auditor and
theConductofanAuditinAccordanceWithGenerallyAcceptedAuditingStan-
dards (AICPA, Professional Standards).Interpretive publications are recom-
mendations on the application of GAAS in specific circumstances, including
engagementsforentitiesinspecializedindustries.
InterpretivepublicationsareissuedundertheauthorityoftheAICPAAuditing
StandardsBoard(ASB)afterallASBmembershavebeenprovidedanoppor-
tunitytoconsiderandcommentonwhethertheproposedinterpretivepublica-
tionisconsistentwithGAAS.ThemembersoftheASBhavefoundtheauditing
guidanceinthisguidetobeconsistentwithexistingGAAS.
Although interpretive publications are not auditing standards, AU-C section
200 requires the auditor to consider applicable interpretive publications in
planningandperformingtheauditbecauseinterpretivepublicationsarerele-
vanttotheproperapplicationofGAASinspecificcircumstances.Iftheauditor
doesnotapplytheauditingguidanceinanapplicableinterpretivepublication,
the auditor should document how the requirements of GAAS were complied
withinthecircumstancesaddressedbysuchauditingguidance.
TheASBisthedesignatedseniorcommitteeoftheAICPAauthorizedtospeak
fortheAICPAonallmattersrelatedtoauditing.Conformingchangesmadeto
theauditingguidancecontainedinthisguideareapprovedbytheASBChair
(orhisorherdesignee)andtheDirectoroftheAICPAAuditandAttestStan-
dardsStaff.Anychangestotheauditingguidanceinthisguideexceedingthat
ofconformingchangesareissuedafterallASBmembershavebeenprovidedan
opportunitytoconsiderandcommentonwhethertheguideisconsistentwith
theStatementsonAuditingStandards(SASs).
Anyauditingguidanceinaguideappendixorchapterappendixinaguide,or
in an exhibit,while not authoritative,is considered an "other auditing publi-
cation."Inapplyingsuchguidance,theauditorshould,exercisingprofessional
judgment, assess the relevance and appropriateness of such guidance to the
circumstancesoftheaudit.Althoughtheauditordeterminestherelevanceof
otherauditingguidance,auditingguidanceinaguideappendixorexhibithas
beenreviewedbytheAICPAAuditandAttestStandardsstaff,andtheauditor
maypresumethatitisappropriate.
Purpose and Applicability
ThisguideappliestothefinancialstatementsofnongovernmentalNFPsthat
meetthedefinitionofanNFPincludedintheFASBASCglossary.Seechapter
1,"Introduction,"forfurtherinformation.
ThisguidedoesnotdiscusstheapplicationofallGAAPandallGAASthatare
relevant to the preparation and audit of financial statements of NFPs. This
guide is directed primarily to those aspects of the preparation and audit of
financial statements that are unique to NFPs or are considered particularly
significanttothem.
AAG-NFP ©2017, AICPA
v
Recognition
2017GuideEdition
AICPASeniorCommittees
AuditingStandards FinancialReporting
Board ExecutiveCommittee
MikeSantay,Chair JimDolinar,Chair
RickReisig,ASBMember CathyClarke,FinRECMember
TheAICPAgratefullyacknowledgesthosemembersoftheAICPANot-for-Profit
Entities Expert Panel who reviewed or otherwise contributed to the develop-
mentofthiseditionoftheguide:JoelBerry,JenniferBrenner,PaulChobanian,
Karen Craig, Susan L. Davis, Lisa Hinkson, Jennifer Hoffman, Laura Roos,
JamesR.SummerIII,andBrianZygmunt.
The AICPA also thanks Susan E.Budak for her invaluable assistance in up-
datingthe2017editionoftheguide.
AICPAStaff
ChristopherCole
AssociateDirector
MemberLearningandCompetency
and
StaffLiaison
totheNot-for-ProfitEntitiesExpertPanelandGuideTaskForce
2013GuideEdition
Not-for-ProfitEntitiesExpertPanelandGuideTaskForce
(2005-2012)
(memberswhenthiseditionwas (pastmemberswhocontributedto
completed) thisedition)
GregoryCapin,Co-Chair StephenKattell,FormerCo-Chair
CathyJ.Clarke,Co-Chair RobertBatarla
FrankJakosz,FormerCo-Chair SusanE.Budak
AmandaE.Nelson,FormerCo-Chair JohnM.Cotman
ElaineAllen MarianneE.DeVries
JenniferBrenner JulieL.Floch
KarenCraig LarryGoldstein
W.MichaelFritz RichardC.Holt
EllenHobby J.MarkJenkins
JenniferHoffman BlissJones
LaurieHorvath PeterKnutson
JohnA.Mattie ElizabethE.Krisher
CatherineE.Mickle RichardF.Larkin
StuartJ.Miller TimMcCutcheon
AndrewM.Prather DrewM.Paluf
SusanC.Stewart JamesRemis
AndreaWright JohnRing
NancyE.Shelmon
KathleenSpencer
PaulC.Sullivan
©2017, AICPA AAG-NFP
vi
AICPASeniorCommittees
AuditingStandardsBoard
(memberswhenthiseditionwascompleted)
DarrelR.Schubert,Chair DavidMorris
BrianBluhm KennethR.Odom
RobertE.Chevalier DonM.Pallais
SamK.Cotterell BrianR.Richson
JimDalkin MikeSantay
DavidDuree KayW.Tatum
JenniferHaskell KimL.Tredinnick
EdG.Jolicoeur H.StevenVogel
BarbaraLewis KurtisA.Wolff
CarolynH.McNerney
FinancialReportingExecutiveCommittee
(memberswhenthis (pastmemberswhocontributedtothis
editionwascompleted) edition)
RichPaul,Chair JayHanson,FormerChair
AaronAnderson BenjaminS.Neuhausen,FormerChair
LindaBergen DavidAlexander
AdamBrown RobertAxel
TerryCooper RickArpin
LawrenceGray KimberBascom
RandolphGreen GlennBradley
MaryE.Kane NeriBukspan
JackMarkey BrettCohen
JosephD.McGrath PascalDesroches
RebeccaMihalko JamesA.Dolinar
SteveMoehrle L.CharlesEvans
AngelaNewell FayeFeger
MarkScoles BruceJohnson
BradSparks RichardJones
DustyStallings CarlKampel
LisaKelley
DavidMorris
JonathonNus
RichardPetersen
RoyRendino
TerrySpidell
RandallSogoloff
RichardK.Stuart
EnriqueTejerina
RobertUhl
DanWeaver
DanZwarn
TheAICPAandtheNot-for-ProfitEntitiesExpertPanelandGuideTaskForce
gratefullyacknowledgetheinvaluableassistanceofJoelTanenbaumtothede-
velopmentandcontentofthisguide.
Guidance Considered in This Edition
ThiseditionoftheguidehasbeenmodifiedbytheAICPAstafftoincludecertain
changesnecessaryduetotheissuanceofauthoritativeguidancesincetheguide
AAG-NFP ©2017, AICPA
vii
wasoriginallyissued(March1,2013,edition),andotherrevisionsasdeemed
appropriate.RelevantguidanceissuedthroughMarch1,2017,hasbeenconsid-
eredinthedevelopmentofthiseditionoftheguide.However,thisguidedoes
notincludeallaudit,accounting,reporting,regulatory,andotherrequirements
applicabletoanentityoraparticularengagement.Thisguideisintendedtobe
usedinconjunctionwithallapplicablesourcesofrelevantguidance.
Relevant guidance that is issued and effective on or before March 1,2017,is
incorporated directly in the text of this guide. Relevant guidance issued but
not yet effective as of the date of the guide and not becoming effective until
afterJune30,2017,isreferencedina"guidanceupdate"box;thatis,aboxthat
containssummaryinformationontheguidanceissuedbutnotyeteffective.
In updating this guide,all guidance issued up to and including the following
wasconsidered,butnotnecessarilyincorporated,asdeterminedbasedonap-
plicability:
(cid:2)
FASB Accounting Standards Update (ASU) No. 2017-05, Other
Income—GainsandLossesfromtheDerecognitionofNonfinancial
Assets(Subtopic610-20):ClarifyingtheScopeofAssetDerecogni-
tion Guidance and Accounting for Partial Sales of Nonfinancial
(cid:2) Assets
SAS No. 132, The Auditor's Consideration of an Entity's Ability
toContinueasaGoingConcern(AICPA,ProfessionalStandards,
(cid:2) AU-Csec.570)
Interpretation No. 3, "Reporting on Audits Conducted in Accor-
danceWithAuditingStandardsGenerallyAcceptedintheUnited
States of America and International Standards on Auditing," of
AU-Csection700,ForminganOpinionandReportingonFinan-
cialStatements(AICPA,ProfessionalStandards,AU-Csec.9700
(cid:2) par..08–.13)
Statement of Position 13-2,Performing Agreed-Upon Procedures
Engagements That Address the Completeness, Mapping, Consis-
tency,orStructureofXBRL-FormattedInformation(AICPA,Pro-
fessionalStandards,AUDsec.55)
Usersofthisguideshouldconsiderguidanceissuedsubsequenttothoseitems
listedpreviouslytodeterminetheireffectonentitiesandengagementscovered
bythisguide.Indeterminingtheapplicabilityofrecentlyissuedguidance,its
effectivedateshouldalsobeconsidered.
The changes made to this edition of the guide are identified in appendix
F, "Schedule of Changes Made to the Text From the Previous Edition." The
changesdonotincludeallthosethatmightbeconsiderednecessaryiftheguide
weresubjectedtoacomprehensivereviewandrevision.
FASBstandardsquotedarefromtheFASBAccountingStandardsCodification
©2017,FinancialAccountingFoundation.Allrightsreserved.Usedbypermis-
sion.
AuditorswhoperformauditsunderGovernmentAuditingStandards;theSin-
gle Audit Act Amendments of 1996; and Office of Management and Budget
(OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations;or Title 2 U.S.Code of Federal Regulations Part 200,Uniform
AdministrativeRequirements,CostPrinciples,andAuditRequirementsforFed-
eralAwards(UniformGuidance),shouldalsorefertotheAICPAAuditGuide
GovernmentAuditingStandardsandSingleAudits.
©2017, AICPA AAG-NFP
viii
FASB ASC Pending Content
Presentation of Pending Content in FASB ASC
AmendmentstoFASBASC(issuedintheformofASUs)areinitiallyincorpo-
ratedintoFASBASCin"pendingcontent"boxesbelowtheparagraphsbeing
amendedwithlinkstothetransitioninformation.Thependingcontentboxes
aremeanttoprovideuserswithinformationabouthowtheguidanceinapara-
graphwillchangeasaresultofthenewguidance.
Pendingcontentappliestodifferententitiesatdifferenttimesduetovarying
fiscal year-ends, and because certain guidance may be effective on different
dates for public and nonpublic entities. As such, FASB maintains amended
guidance in pending content boxes within FASB ASC until the roll-off date.
Generally,theroll-offdateissixmonthsfollowingthelatestfiscalyearendfor
whichtheoriginalguidancebeingamendedcouldstillbeapplied.
Presentation of FASB ASC Pending Content in AICPA Guides
Amended FASB ASC guidance that is included in pending content boxes in
FASBASConMarch1,2017,isreferencedas"PendingContent"inthisguide.
Readersshouldbeawarethat"PendingContent"referencedinthisguidewill
eventuallybesubjectedtoFASB'sroll-offprocessandnolongerbelabeledas
"PendingContent"inFASBASC(asdiscussedinthepreviousparagraph).
Terms Used to Define Professional Requirements
in This AICPA Guide
Any requirements described in this guide are normally referenced to the ap-
plicable standards or regulations from which they are derived.Generally the
terms used in this guide describing the professional requirements of the ref-
erencedstandardsetter(forexample,theASB)arethesameasthoseusedin
the applicable standards or regulations (for example, must or should). How-
ever, where the accounting requirements are derived from FASB ASC, this
guideusesshould,whereasFASBusesshall.Initsresourcedocument,"About
theCodification,"thataccompaniesFASBASC,FASBstatesthatitconsiders
thetermsshouldandshalltobecomparabletermsandtorepresentthesame
concept—therequirementtoapplyastandard.
Readersshouldrefertotheapplicablestandardsandregulationsformorein-
formation on the requirements imposed by the use of the various terms used
todefineprofessionalrequirementsinthecontextofthestandardsandregula-
tionsinwhichtheyappear.
Certainexceptionsapplytothesegeneralrules,particularlyinthosecircum-
stances where the guide describes prevailing and/or preferred industry prac-
tices for the application of a standard or regulation. In these circumstances,
theapplicableseniorcommitteeresponsibleforreviewingtheguide'scontent
believestheguidancecontainedhereinisappropriateforthecircumstances.
Applicability of GAAS and PCAOB Standards
Auditsofthefinancialstatementsofthoseentitiesnotsubjecttotheoversight
authorityofthePCAOB(thatis,thoseauditreportsnotwithinthePCAOB's
jurisdiction as defined by the Sarbanes-Oxley Act of 2002, as amended—
AAG-NFP ©2017, AICPA
ix
hereinafterreferredtoasnonissuers)1 aretobeconductedinaccordancewith
GAAS as issued by the ASB. The ASB develops and issues standards in the
formofSASsthroughadueprocessthatincludesdeliberationinmeetingsopen
tothepublic,publicexposureofproposedSASs,andaformalvote.SASsand
their related interpretations are codified in Professional Standards.In citing
GAAS and the related interpretations,references generally use section num-
bers within the codification of currently effective SASs and not the original
statementnumber,asappropriate.
In rare situations, an auditor may be engaged to also follow PCAOB audit-
ingstandardsintheauditofanNFP.Thisguidedoesnotprovideinformation
aboutauditsconductedinaccordancewithPCAOBstandards.Whentheaudit
isnotunderthejurisdictionofthePCAOBbuttheentitydesires,orisrequired
by an agency,by a regulator,or by contractual agreement,to obtain an audit
conductedunderPCAOBstandards,theAICPACodeofProfessionalConduct
requirestheauditortoalsoconducttheauditinaccordancewithGAAS.Para-
graph.44andparagraphs.A43–.A47ofAU-Csection700clarifytheformatof
theauditor'sreportthatshouldbeissuedwhentheauditorconductsanaudit
inaccordancewiththestandardsofthePCAOB,buttheauditisnotunderthe
jurisdictionofthePCAOB.
Applicability of Quality Control Standards
QCsection10,AFirm'sSystemofQualityControl(AICPA,ProfessionalStan-
dards),addressesaCPAfirm'sresponsibilitiesforitssystemofqualitycontrol
for its accounting and auditing practice.A system of quality control consists
ofpoliciesthatafirmestablishesandmaintainstoprovideitwithreasonable
assurancethatthefirmanditspersonnelcomplywithprofessionalstandards,
aswellasapplicablelegalandregulatoryrequirements.Thepoliciesalsopro-
vide the firm with reasonable assurance that reports issued by the firm are
appropriateinthecircumstances.
QC section 10 applies to all CPA firms with respect to engagements in their
accounting and auditing practice. In paragraph .06 of QC section 10, an ac-
countingandauditingpracticeisdefinedas"apracticethatperformsengage-
ments covered by this section, which are audit, attestation, compilation, re-
view, and any other services for which standards have been promulgated by
theAICPAAuditingStandardsBoard(ASB)ortheAICPAAccountingandRe-
viewServicesCommittee(ARSC)underthe"GeneralStandardsRule"(AICPA,
ProfessionalStandards,ETsec.1.300.001)orthe"ComplianceWithStandards
Rule"(AICPA,ProfessionalStandards,ETsec.1.310.001)oftheAICPA Code
of Professional Conduct. Although standards for other engagements may be
promulgatedbyotherAICPAtechnicalcommittees,engagementsperformedin
accordance with those standards are not encompassed in the definition of an
accountingandauditingpractice."
InadditiontotheprovisionsofQCsection10,readersshouldbeawareofother
sectionswithinAICPAProfessionalStandardsthataddressqualitycontrolcon-
siderations,includingthefollowingprovisionsthataddressengagementlevel
quality control matters for various types of engagements that an accounting
andauditingpracticemightperform:
1 SeethedefinitionofthetermnonissuerintheAU-CGlossary(AICPA,ProfessionalStandards).
©2017, AICPA AAG-NFP
x
(cid:2)
AU-C section 220, Quality Control for an Engagement Con-
ducted in Accordance With Generally Accepted Auditing Stan-
(cid:2) dards(AICPA,ProfessionalStandards)
AT-C section 105, Concepts Common to All Attestation Engage-
(cid:2) ments(AICPA,ProfessionalStandards)
AR-C section 60,General Principles for Engagements Performed
inAccordanceWithStatementsonStandardsforAccountingand
ReviewServices(AICPA,ProfessionalStandards)
Becauseoftheimportanceofengagementquality,thisguideincludesappendix
E,"OverviewofStatementsonQualityControlStandards."Thisappendixsum-
marizeskeyaspectsofthequalitycontrolstandard.Thissummarizationshould
bereadinconjunctionwithQCsection10,AU-Csection220,AT-Csection105,
andAR-Csection60,asapplicable.
AICPA.org Website
TheAICPAencouragesyoutovisititswebsiteatwww.aicpa.organdtheFinan-
cial Reporting Center (FRC) at www.aicpa.org/FRC.The Financial Reporting
Centersupportsmembersintheexecutionofhigh-qualityfinancialreporting.
Whether you are a financial statement preparer or a member in public prac-
tice,thiscenterprovidesexclusivemember-onlyresourcesfortheentirefinan-
cial reporting process, and provides timely and relevant news, guidance and
examplessupportingthefinancialreportingprocess.Anotherimportantfocus
oftheFRCiskeepingthoseinpublicpracticeuptodateonissuespertainingto
preparation,compilation,review,audit,attestation,orassuranceandadvisory
engagements.CertaincontentontheAICPA'swebsitesreferencedinthisguide
mayberestrictedtoAICPAmembersonly.
Select Recent Developments Significant to This Guide
AICPA’s Ethics Codification Project
The AICPA's Professional Ethics Executive Committee (PEEC) restructured
andcodifiedtheAICPACodeofProfessionalConduct(code)sothatmembers
and other users of the code can apply the rules and reach appropriate con-
clusions more easily and intuitively. This is referred to as the AICPA Ethics
CodificationProject.
AlthoughPEECbelievesitwasabletomaintainthesubstanceoftheexisting
AICPAethicsstandardsthroughthisprocessandlimitedsubstantivechanges
to certain specific areas that were in need of revision, the numeric citations
and titles of interpretations have all changed.In addition,the ethics rulings
are no longer in a question and answer format,but rather have been drafted
as interpretations, incorporated into interpretations as examples, or deleted
wheredeemedappropriate.Forexample,
(cid:2)
Rule101,Independence(ETsec.101.01),isreferredtoasthe"In-
(cid:2) dependenceRule"(ETsec.1.200.001)intherevisedcode.
thecontentfromtheethicsrulingtitled"FinancialServicesCom-
panyClienthasCustodyofaMember'sAssets"(ETsec.191.081–
.082) is incorporated into the "Brokerage and Other Accounts"
interpretation (ET sec. 1.255.020) found under the subtopic
AAG-NFP ©2017, AICPA