Chapter 16, Problem 1Q

To determine

State whether the given statement is acceptable and also provide the reason for the statement to be acceptable or not acceptable.

Explanation of Solution

Financial accounting standards board (FASB): This is the organization which creates, develops, and approves accounting principles and standards for state and local governments and for not-for-profit organizations.

The not-for-profit health care entities and investor-owned entities use different method of financial reporting. Even though the FASB acts as an authoritative source for establishing accounting and financial reporting standards for investor-owned and not- for- profit health care organization, there are certain difference in the reporting standards.

The FASB makes necessary changes in the standards of cash flow, deposits with financial institutions, investment and leases. Some of the reasons for the difference in financial reporting requirements are given below:

• Not for profit organization will not segregates its investment like investor-owned organization executes its investment into trading, available –for-sale, and held- to maturity.
• Not for Profit (NFP) organization are guided by FASB while reporting non-exchange resource received in operating statement and statement of cash flows.