Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Archive for the ‘Accounting’ Category

California bill AB 1181 would address valuation of GIK when donor restricts distribution to outside U.S.

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What is the fair value of donated medicine restricted for use outside the U.S.? Image courtesy of Adobe Stock.

The California Assembly has passed and sent to the Senate a bill which would require specific accounting for charities who receive gifts-in-kind which are restricted by the donor for distribution outside the U.S.

For that very specific type of GIK, the bill would require the donation to be recorded at the fair value in the country where the items will be used.

This will particularly affect donated pharmaceuticals, which often have a severely different value in the U.S. compared to values internationally.

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Written by Jim Ulvog

June 13, 2019, 8:41 am at 8:41 am

Posted in Accounting

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CPA sanctioned by California Attorney General over audit of charity

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Image courtesy of Adobe Stock.

The California AG negotiated a settlement with a charity for their alleged overvaluation of medical GIK. I say alleged because the charity, three present or former board members, the charity’s insurance company, and the external auditor all deny in the settlement they did anything wrong.

The alleged scheme, according to the AG, was the charity used two other charities, which it formed, to buy medicine in the Netherlands and then donate it back to the ‘parent’, which then recognized GIK at US prices.

The AG asserts that over the course of 25 or more transactions, the purchase of about $225,000 of medicine by the two controlled charities generated gift-in-kind revenue of about $34,900,000 in the sanctioned charity.

Of note for readers of this blog is that the CPA providing an external audit was sanctioned as part of the negotiated settlement. She audited the charity and signed its 990s. She also audited one of the controlled charities and signed their 990s.

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Written by Jim Ulvog

June 4, 2019, 10:23 am at 10:23 am

Been thinking the volume of accounting rules is growing a lot? It isn’t your imagination. Here’s a page count of GAAP.

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Is this how you’ve been feeling with all the changes in GAAP stacking up on your desk? Image courtesy of Adobe Stock.

Just in case you had been wondering in your idle time how many pages long the Accounting Standards Codification would be in print form, I have the answer.

10,068 pages.

How thick is that if you stacked the five volumes on top of one another?

12.75 inches.

I’m working on a writing project for which it will be convenient to have a hard copy of the ASC, so I ordered a copy. Yipee! It arrived yesterday!

In case it seems like the volume of rules is growing faster than you can keep track, here is a seven-year comparison, looking at the physical size and volume count of the 2017 and 2010 editions:

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Written by Jim Ulvog

September 13, 2018, 6:32 am at 6:32 am

Posted in Accounting

Updated warning for tsunami on the horizon for charity financial statements.

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tsunami” by hansol is licensed under CC BY 2.0

The July 2017 post explaining Before the tsunami hits it might be time to tune into the accounting rules on the horizon  at my other blog, Nonprofit Update, has been updated to mention ASU 2018-08, which addresses accounting for contributions and grants. Might be worth your time to think about the major changes in accounting rules coming into play over the next few years.

Written by Jim Ulvog

August 5, 2018, 14:56 pm at 2:56 pm

Posted in Accounting

2018 nonprofit risk alert is available. New edition adds discussion on valuation of GIK as rebuttal to California AG.

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Cover of 2018 NFP risk alert, used under fair use since I’m recommending you buy the document.

The AICPA has released the 2018 edition of Not-for-Profit Entities Industry Developments.

If you are a CPA serving the not-for-profit community, you need to read this document each year. It provides a survey of the accounting and auditing issues affecting the nonprofit world.

If you are an auditor, there are several other risk alerts you ought to be reading every year.

(Cross-posted from my other blog, Nonprofit Update, since this information is useful for many CPAs.)

If you are working for a nonprofit, these alerts would give you a good survey of accounting issues in general and the audit issues your CPA will be dealing with this year.

Valuation of Gifts in Kind

Of particular interest are new comments responsive to the challenge from the California AG over valuation of GIK. The 2017 and 2016 editions had minimal comments on GIK.

The 2018 edition has a new section, Gifts-in-Kind: Reporting Contributions of Nonfinancial Assets, in paragraphs .53 through .57, which describes the AICPA’s interpretation of GAAP.

Years after the mebendazole issue has faded away, the second bullet point of paragraph .56 says that when GIK is sourced outside the U.S. and is not approved for distribution in the U.S., the meds should be valued at international prices. (If you have been following this issue for years, you realize the concession made by that comment.)

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Written by Jim Ulvog

June 11, 2018, 8:40 am at 8:40 am

Posted in Accounting, Audits

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Accounting for donated medicine drawing regulatory attention: California A.G. files 3 cease and desist orders.

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Image courtesy of Adobe Stock.

The California Attorney General has taken exception to the valuation of donated medicine by three large charities.

In March 2018 MAP International, Food for the Poor, and Catholic Medical Mission Board were served with cease and desist orders insisting the charities cease using their claims of extremely high program service percentages. The AG also seeks to revoke charitable registration status in the state for MAP and FftP. The cease and desist orders seek to impose substantial fines on the charities.

The AG also claims that FftP incorrectly applied joint cost allocation.

The filed actions alleged that financial reporting for the years 2012 through 2015 is incorrect. This would include the audited financial statements, 990s, and RRF-1s (for MAP and FftP).

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Written by Jim Ulvog

March 20, 2018, 8:33 am at 8:33 am

Posted in Accounting, Audits

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Free update on new and recent accounting rules from CCH

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For a summary of the accounting rules released in 2017 and the most significant new rules from 2016, 2015, and 2014, check out A Closer Look: Discussion and Analysis of Current Accounting and Audit Issues.

CCH made this update available for free to people on their mailing list. I received permission from my editor at CCH to make it available on my blog.

Click here to download the 54 page newsletter. CCH does not  have a separate landing page for the document, so that link automatically downloads the newsletter. UPDATE:  If link didn’t work for you, please try again. I reloaded the link and it is working now.

For each of the accounting rules covered, the newsletter provides:

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Written by Jim Ulvog

January 29, 2018, 7:32 am at 7:32 am

Posted in Accounting

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