Discussion:Restricted Assets
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Discussion Forum Index --> Accounting Questions --> Restricted Assets
| 16 September 2009 | |
| Here's the situation.....
Small non profit has temporarily restricted net assets at the end of the fiscal year along with unrestricted net assets. In the financial statements, the auditor is showing both cash and certificates of deposit as having a restricted as well as an unrestricted component. Is this presentation proper and if so why? My understanding of restricted assets is that the asset is restricted if it's use is for a specific item, i.e. a sinking fund or escrow account. I show restricted cash on certain of my audit clients because the assets in question are held by a Trustee and are only available to pay bondholders. In this instance (I'm the auditee not the auditor) all of our cash is commingled unless we have arbitrarily segregated some for cash management purposes. Seems to me that temporarily restricted net assets do not necessarily result in restricted assets. | |
Ksnoopytax (talk|edits) said: | 16 September 2009 |
| I believe you are confusing two types of restrictions. A restriction on cash would be if you had a loan outstanding for which you were required to keep a compensating cash balance with the bank. The cash would be restricted and reported as such on the balance sheet.
In non-profit accounting, net assets can be unrestricted, temporarily restricted, or permanently restricted. This could be because of donation that was temporarily restricted for a certain expense such as buying a specific item or spending it on a specific program. Or it also could be time restricted such as a United Way grant for the following year. This is all covered in FASB 117. | |
| 17 September 2009 | |
| I think your gut is telling you this isn't right and I would agree based upon my understanding of the facts. Snoopy outlines it well above, but it doesn't seem like you have any restricted cash...just restricted net assets. | |
| September 17, 2009 | |
| Rkr, based on the information you provided, I agree with you that the cash and CDs are not restricted -- the presentation is not proper. | |
| 17 September 2009 | |
| Thanks for the input, I think the auditor is confused. Now I just need to figure out how to make her understand. | |
