SLIDE # 4

A Non-Governmental Organization (NGO) and Non-Profit Organization (NPO) both work not for the
purpose of making profit but for social good. Many of their goals and initiatives are similar to each other
as well which is why often times the public would get confused on the differences of these two
organizations. 

To begin, an NGO works outside the government body but would sometimes still be funded by
government agencies. Likewise, NGOs also focus on large projects and would often even go international
in the said projects. These projects would include aiding the underprivileged communities in developing
countries. On the other hand, NPOs are normally partnered with churches or local entities for the
improvement of areas locally.  NGOs are working on cases and issues far greater than NPOs

Non-profit organization (NPO) – also called not for profit entity NFP or non-commercial organization
NCO is one that carries out some socially desirable needs of the community or its members and whose
activities are not directed towards making profit.

NPOs may be in the form of educational institutions, hospitals and other healthcare providers, religious
institutions, professional bodies, sports, social or literary clubs and other forms of charitable institutions.

still operate to make profit, not for personal gain but to help many parts of society

NPO’S can earn revenues sufficient to cover their expenses. A major portion of it are derived from
charitable donations and fundraising activities. Surplus revenues do not inure to the benefit of a
particular individual or group of individuals but rather retained in furtherance of the organizations
mission. So none of the surplus revenues are distributed as dividends.

Because NPOs carry out their activities in the interest of society, NPOs are usually exempt from income
taxation

Slide #5

In practice, the accounting for non-profit organizations is essentially similar to the accounting for
businesses. The notable differences are the terminologies used in the financial statements, which are
modified to suit the non-profit organization’s purpose, and the presentations and disclosure of equity.

They are required to file audited annual financial statements to the Securities and Exchange Commission
(SEC).

In most cases the auditor’s reports in these financial statements state an opinion on the organization’s
compliance with the PFRSs
Slide# 6 (SGV EXAMPLE OPINION)

Since the PFRS do not provide specific guidance on the accounting for non profit organizations, many
non-profit organizations resort to the exemptions provided under PAS 8 (Accounting policies , Changes
in Accounting Estimates and errors) For example , in cases where the PFRS are silent regarding the
accounting treatment for or financial statement presentation of, a transaction peculiar to non profit
organizations, the organization may refer to the general guidelines set forth under the Conceptual
Framework.

Dahil nga kumbaga walang na provide si PFRS ngayon ang mangyayari magiissue ngayon si npo sa
kanyang notes sa FS ng isang modified statement of compliance. Ilalagay nila don sa modified statement
of compliance nila na “ The financial statements have been prepared in accordance with and comply
with International Financial Reporting Standards of IFRS.

Slide # 7

Ang alam kase naten whether ifrs or pfrs they are both designed to apply to business entities , they can
also be applied to non profit organization. Kung ayaw niyo maniwala saken here are some excerpts mula
mismo sa IFRS AND PFRS.

IFRSs are designed to apply to the general purpose financial reporting of profit-oriented entities.
Although the IFRSs are not designed to apply to not-for-profit activities, entities with such activities may
find them appropriate. (Preface to IFRSs 9)

PAS 1 Presentation of Financial Statements uses terminology that is suitable for profit oriented entities.
If entities with not-for-profit activities apply PAS 1, they may need to amend the descriptions used for
particular line items in the financial statements and for the financial statements themselves. (PAS 1.5)

IFRSs generally do not have scope limitations for not-for-profit activities. Although IFRSs are developed
for profit-oriented entities, a not-for-profit entity might be required, or choose, to apply IFRSs. (IFRS 3
Business Combinations BC63)

Slide#8

PFRS principles applicable to NPOs

 Recognition criteria for assets and liabilities:

 Meets the definition of an asset or liability;

 Probable inflow or outflow of resources; and

 Measurement of Asset or Liability:

 Initial measurement at cost except when a

relevant PFRS requires measurement at fair

value or some other value.

 Subsequent measurement at amortized cost,

Under the cost model, or some other

measurement model required by relevant PFRS.

 Derecognition of Asset or Liability:

 An asset (or liability) is derecognized when it ceases to provide inflow (or require outflow) of
resources embodying economic benefits. The difference between the carrying amount and net
proceeds (or net settlement), if any, is recognized in change in net assets.

 Presentation of Financial Statements:

 General features: Fair presentation and compliance with PFRSs, Going concern, Accrual basis,
Materiality and aggregation, Offsetting, Frequency of reporting, Comparative information, and
Consistency of presentation.

So ngayon alam niyo na yung mga PFRS priniciples na applicable sa npo pero kase yung mga
illustration na ipapakita namen sa mga susunod na slides ay naka based na sa mga accounting
principles na pinrovide ni US GAAP particularly sa sfas no 116 (Accounting for contributions
made and received )and sfas no 117( financial statements of not for profit organizations) .
Although these principles do not have the same authority as those of the pfrs, they may be
adopted in conjunction with the PFRS( to the extent that they did not contravene the
provisions of the pfrs)

Slide#9

Accounting for non-profit organizations

The financial statements of most NPOs are based on the fund theory. The fund theory stresses a great
importance on the custody and administration of funds. Accordingly the source, nature and purpose of
the funds held by the NPO are disclosed in order to give information necessary for users to assess the
organization’s stewardship over those funds.

Under fund accounting, the main accounting unit is the fund. Accodingly, transactions are accounted for
in the books and presented in the financial statements strictly based on their fund classifications as
either (1) Unrestricted, (2) Temporarily restricted, or (3) Permanantly restricted
Ngayon alam na naten yung book definition ng fund theory at fund accounting at nabanggit nadin na
most of the npos ay gamit yung fund theory although wala naman say si pfrs diyan kung anong trip
gamitin ng npo wala naman sinabi na pag npo ka dapat fund accounting gamit mo, well nasasainyo
yan in laymans term kung anong bet niyo edi go. Walang pino prohibit si prfs diyan.

Slide #10

TABLE AND THEN CHIKA WHILE READING

SLIDE #11

Contributions refer to resources received in non- reciprocal transactions. Contributions exclude those
that result from exchange transaction (i.e., resources received in exchange for other resources or
obligations).

SFAS 116 classifies contributions based on donor’s restriction as follows:

1. Unrestricted- available for immediate use and for any purpose.

2. Temporarily restricted- restricted by the donor in such way that the availability of the
contribution for the NPOs use is dependent upon:

A. The performance of a specific task;

B. The happening of a future event; or

C. The passage of time

SLIDE #12

3. Permanently restricted- restricted by the donor in such a way that the organization will never be
able to use the contribution itself; however, the organization may be able to use the income
therefrom.

Permanently restricted assets are funds of a nonprofit organization that must be used in designated

 Generally, the majority of donations to nonprofit organizations are unrestricted, which allows the
organization to freely utilize the money as they see fit. Temporarily restricted assets come with strings
attached — that is, they must be earmarked for certain purposes, but only until the expiration of the
term stipulated by a donor.

The third type, permanently restricted assets, are usually related to a particularly large donation, the
donor of which a majority of the time will specify the purpose of the money. The amount will be
meaningful and intended to fund designated areas in perpetuity (i.e., "permanently"). A common type
of permanently restricted asset is real estate. For example, an individual or organization may donate a
large chunk of real estate to a nonprofit entity, such as a public university, with the restriction that the
property only be used to house scientific research labs in perpetuity. The property can never be resold
by the university for a capital gain.

RECOGNITION AND MEASUREMENT

Cash and other Non-cash assets

Cash and other non-cash assets received as contributions are recognized as revenues in the period
received and as assets, decreases of liabilities or expenses depending on the form of the benefits
received.

Contributions are measured at fair value at the date of contribution, and are reported as either:

A. Unrestricted support- revenue from unrestricted contributions; or

B. Restricted support- revenue from temporarily restricted or permanently restricted

OUTRO

Some people – for example citizens who belong to certain religious, ethnic or other minority groups -
have needs that most other voters do not. Government usually responds to the “average” voter, to the
needs of the majority. Therefore minority needs are often satisfied by nonprofit organizations.