Exam 1: The Government and Not-For-Profit Environment

Which of the following is an objective of financial reporting by nongovernmental not-for-profit entities as established by the FASB?

Save-the-Birds (STB), a not-for-profit entity dedicated to acquiring and preserving habitat for upland birds, prepares financial statements in accordance with generally accepted accounting principles. Currently, standards require that a not-for-profit entity report virtually all contributions as revenue in the year received. During the current year STB received a donation of several hundred acres of prime habitat for upland birds. STB will require several hundred thousand dollars in additional donations in order to make the land completely suitable for the birds. Before embarking on its fund-raising campaign STB prepares financial statements which are summarized as follows. What difficulties, if any, will STB encounter in its new fund-raising drive? Knowing that the donation of the land accounted for $1,000,000 of the revenue reported by STB, do you think the financial statements present fairly the financial position and results of operations of this not-for-profit entity?

To obtain a comprehensive understanding of a government's fiscal health, a financial analyst should obtain an understanding of which of the following?

The Governmental Accounting Standards Board establishes generally accepted accounting principles for all state and local governments and all not-for-profit entities.

A primary tool of both governments and not-for-profit to acquire funds to finance long-term projects is

Lenders use the financial statements of governments and not-for-profit entities just as they would those of businesses, that is, to help assess the borrower's credit-worthiness.

The Governmental Accounting Standards Board (GASB) stated that an objective of financial reporting is to measure interperiod equity, that is-"Financial reporting should provide information to determine whether current-year revenues were sufficient to pay for current-year services." What is your understanding of interperiod equity? What costs incurred in the current year should be paid for by the taxpayers of the current period? What costs incurred in the current year should be paid for by future taxpayers?

Users of government financial statements should be interested in information about compliance with laws and regulations for which of the following reasons?

Which of the following is a probable use an individual donor would make of the external financial statements of a not-for-profit entity?

Governments and not-for-profit entities may never engage in business-type activities.

The primary standard-setting body for accounting and financial reporting by a state-supported college or university is:

Which of the following is NOT generally considered a main user of government and not-for-profit entity external financial statements?

The Governmental Accounting Standards Board is the primary standard-setting body for:

Which of the following is NOT a purpose of external financial reporting by governments?

A government's constituants rely on general purpose financial statements for a considerable amount of information about their government.

Sarbanes-Oxley was passed in 2002 to enhance the independence of the GASB.

A government's budget may be backed by the force of law.

The basis of accounting selected by or imposed on a government can influence which of the following?

Under certain circumstances a government might use standards established by which of the following standard-setting bodies?

In the United States, educational services can be provided by federal government entities, by non-federal government entities, by not-for-profit entities, and by for-profit entities. Are the accounting and financial reporting standards the same for each of these entities? Should they be the same?