When to take the option When to exercise discretion When to get an - - PDF document

10/18/2019 1

Options & Opinions: The Art of Accounting

UFLC 2019

Ashley Voss, CPA Ratliff & Associates

When to take the option When to exercise discretion When to get an opinion When to get something else

Session Summary

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When to take the option

Other methods of accounting and reporting

Accounting Methods vs Reporting Methods

GAAP Accrual accounting

Modified Cash Basis SPF (Special purpose framework, OCBOA)

Most nonprofit organizations operate (“account”) on a modified cash basis. Therefore, the real question is what method, or presentation framework, do you use (or should use) for reporting…?

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GAAP Accrual Option

• What is your reporting requirement?
• What about in the future?
• Who is your reader?
• Internal
• External
• Do you want a balance sheet (SoFP)?
• Property & equipment – historical cost
• Accumulated depreciation
• Investments – fair market value

GAAP Accrual Option

• How difficult are your accruals?
• Depreciation
• AP
• Payroll
• Interest
• How different will the final GAAP

report be from your internal report?

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SPF

Modified Cash

Option

• “Cash‐basis” is usually, truly

modified‐cash basis

• Bank recs ‐ record o/s items
• Investments – adjusted to FMV
• Notes payable – accrued
• Budgetary basis is modified cash

basis

• Accrue yearend donations in and out
• Record revenue for Christmas contributions
• Record expenses for the current years

mission’s budget

• This is modified‐cash NOT

modified‐GAAP

• Modified‐GAAP is called noncompliance

(an error or scope limitation) and for the audit a qualified opinion

SPF

Modified Cash

Option

• Don’t need a complete balance sheet
• No or minimal AP and accruals
• Some or all property and equipment expensed

rather than capitalized

• Property but may not have depreciation expense
• Still have notes payable
• Still have net assets requirements
• Still have most GAAP disclosures
• More closely resembles your

internal accounting

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When to exercise discretion

The judgement call

+ Depreciation + Expense allocation Payroll & Facilities + Investment valuations + Current accruals + Allowances + Internal designated funds + Future commitments + Fewer for modified cash (but still disclose…?)

Accounting Estimations

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SoFP = classified vs unclassified (current assets/liabs) SoA = net asset activities

• ver/under vs columnar

SoCF = direct vs indirect; reconciliation or no rec SoFE = functions and naturals Disclosures = note 1; net asset summary; liquidity disclosure Modified‐cash= even more….!

Reporting Presentation

When to get an opinion

The audit

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Time‐tested

Highest assurance

Comprehensive (but not completely) Universally accepted Costly

When to get something else

Other than an audit

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Review Compilation Agreed Upon Procedures Examination

Attestation vs Advisory

Consulting Outsourcing Bookkeeping Risk Assessment Policies & Procedures Internal Controls Governance

What’s your budget? Is an attestation required? Is audit‐review rotation an option? Are you more concerned about annual close or monthly close? Or daily close? Do you need an independent party? Do you need financial statements? Do you need recommendations?

Do you just want to know if you’re doing it right?

Do you need help?

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Questions?

Ashley Voss, CPA, R&A avoss@ratliffcpas.com 817‐332‐3222

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