Interim Accounting Standards of Nonprofit Legal Entities


The above – mentioned Standard is specific and contains peculiarities characteristic of nonprofit legal entities. We present you consideration of these peculiarities in our Accounting Bulletin rubric.

According to the Standard, the head of organization is in charge of preparation and submitting of a financial statement. A complete package of organization’s financial statement should contain the organization’s balance-sheet, an account on the results of activities, an account on the changes in the stock, an account on money flows, accounting policy, and explanatory notes.
Under the decision of the administrative board the organization can, along with the financial statement, submit financial review prepared by the management, in which the results of the projects implemented by it, and the main issues of financial state will be described. The results of the organization’s financial activities and money flows for the account period should be truly indicated in the statement, and for this purpose the organization can make the explanatory notes which are not required by the given Standard. The organization should present the statement by the end of the account period.
Based on specific character of the organization, lack of correspondence to the norms envisaged by the standard is permitted. In that case the fact and reason of the discrepancy should be indicated in the financial statement.
In the process of preparation of the organization’s financial statement, it should be appraised whether the organization has ability for continuation of its activities. Financial statement should be drawn up taking into account the functionality principle, which implies preparation of the statement and its submission, in accordance with the standard, only when the organization retains functioning ability.
Except for money flow account, financial statement of the organization should be prepared using adding on methods.
In using adding on method in accounting, operations and phenomena should be recognized right after their implementation. They should be reflected in the registers and financial statement of the period to which their fulfillment is referred.
For securing the comparability principle, classification of financial statement’s articles and the form of its submission should be retained in each subsequent account period.
It is necessary to separately present all articles of the financial statement. All inessential sums should be joined together in accordance with similarity of their functions and content, and it is not necessary to present them separately.
Inter-covering of assets and liabilities is not allowed if it is not required by any norms of simplified Standards of a small-scale enterprise accounting.
The following information should be formulated in the financial statement:
– The name of the organization and other identification data;
– The date of striking a balance or the period reflected in the financial statement which conforms to corresponding component of the financial statement;
– Currency of payment;
– The accuracy rate of the dates presented in the financial statement.
According to the Standard, it is recommended, but not necessary, to separately show short-term and long-term balance items. If the organization does not separate long-term balance items from short-term ones, their presentation takes place in accordance with the growth of liquidity.
Liability whose covering takes a period longer than 12 months is considered as a long-term one.
The organization should indicate the following in the balance: fixed assets, investments, material reserves, debtors funds and their equivalents, operational and other liabilities, tax liabilities and assets, assignments, fixed and interest-bearing liabilities, funds and reserves with corresponding sums.
If the organization separates in its financial statement long-term and short-term items, the balance, besides the enumerated items, should contain the names of the sub-groups and total sums.
In the organization’s statement for its activities during the account period there should be shown all recognized expenses and profits for the given period. The following belongs here: profits and expenses from usual activities, as well as special items.
In the organization’s statement concerning its activities there should be separated expenses related to unlimited, temporarily limited, and permanently limited funds. In each of them there must be shown corresponding sums of the following items: income; structure of expenses; the results of current operational activities; financial expenses; tax expenses; exceeding of incomes over expenses or deficit; special items; clear results of the account period.
If the organization implements its activities by means of the obtained grants, it is obliged to reveal additional information concerning the expenditures’ functions. Additional information should be presented in accordance with the project financed by the grant. Clear result of the account period should be presented as a separate item.
As to the above-mentioned special items, frequency of a phenomenon’s occurrence will not be useful for establishing its peculiarity. The circumstances creating special items are mainly expropriation of assets; an earthquake or other natural calamities; assets obtained in connection with liquidation of other similar organization.
The content and the sum of the special item will be separately shown in the explanatory notes of the financial statement, while the total sum of the special item will be shown in the statement concerning the results of the activities.
Financial statement should provide for presentation of the organization’s funds in accordance with limitations imposed by the donor: permanently limited funds; temporarily limited funds and unlimited funds.
The donor’s limitation may require that the resources should be used during the subsequent period or after the indicated date, or used for the indicated purposes. For instance, donation of money or other assets on such taxation condition that will provide income by the indicated term, and so that the income should be used for the indicated purpose, and represent a fund limited in time and purpose. Interesting is showing of money flows of the account period, which should be shown in the statement by grouping of investment and financial money flows. The purpose of grouping of money flows in the above-mentioned way is to establish the role of money flows in each kind of activities.
The organization should present money flows related to operational activities by means of the direct method, in which total flow of receipt and expense of funds will be shown in accordance with the main categories.
Receipt and expense of finds related to investment and financial activities should be shown separately, in accordance with the main category.
Money flows related to economic activities in foreign currency should be shown in the organization’s currency of payment. The exchange rate existing on the day of circulation of currency funds should be used for re-calculation between the currency of payment and the foreign currency.
Money flows related to special items should be grouped in accordance with operational, investment, and financial activities, and should be shown be shown separately.
Money flows given out and received in the form of grants, interest rates and dividends are classified as operational activities and are shown separately.
Money flows related to taxes are classified as operational activities and are shown separately.
Explanatory notes are enclosed with the financial statement and the following should be shown in them: basic information for financial statement and the chosen accounting policy used for showing considerable economic operations and phenomena; separate components of permanently limited funds; temporarily limited funds.
The organization should show its location, the country in which it is registered and the address of its office; the number of members and employees of the organization by the end of the account period, or their medium number during the account period, and the list of registered donors.
In the next issue we shall speak about material reserves, expenses related to using of loans, accounting policy, mistakes and incomes.