Examining the Determinants of Nonprofit Accounting Basis Choice
➤ Gửi thông báo lỗi ⚠️ Báo cáo tài liệu vi phạmNội dung chi tiết: Examining the Determinants of Nonprofit Accounting Basis Choice
Examining the Determinants of Nonprofit Accounting Basis Choice
Examining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choicew York University thad.calabreseti nyu.eduPaper prepared for presentation at the National Conference of the Association for Budgeting and Financial Management Chicago. IL October 23-25, 2008DRAFTPlease do not cite without permission. Comments and suggestions are welcome.IntroductionTills paper exami Examining the Determinants of Nonprofit Accounting Basis Choicenes the determinants of whether nonprofit organizations report their publicly available financial information on the cash or accrual basis of accountiExamining the Determinants of Nonprofit Accounting Basis Choice
ng. Accrual reporting is the norm in the for-profit sector because it is the only basis of accounting that represents the underlying economic value anExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choiceits place less emphasis on profits. Jegers (2002) notes that cash accounting may be more attractive to nonprofits. “(T]he choice between cash accounting and accrual accounting is a genuine choice to be made in the case of [nonprofit organizations]" (440). The choice between cash and accrual financia Examining the Determinants of Nonprofit Accounting Basis Choicel reporting is a logical extension of this theme.This choice of accounting basis lias not been the focus of study in the existing literature.Yet the dExamining the Determinants of Nonprofit Accounting Basis Choice
ecision to report on a cash or accrual basis of accounting has several important implications for nonprofit management and public policy. From a managExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choice's organization is making or losing money, one’s ability to manage is severely limited. Additionally, cash reporting cannot provide a manager with understanding of organization costs. Without this information, a manager cannot price goods and services correctly or. in the case of many nonprofits, de Examining the Determinants of Nonprofit Accounting Basis Choicetermine an appropriate level of subsidy for those in need. Finally, taxpayers provide nonprofits with billions of dollars annually. This money comes dExamining the Determinants of Nonprofit Accounting Basis Choice
irectly from donations, through tax exemptions and tax expenditures, and also through donated time. Cash accounting and reporting will simply report iExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choice cash reporting prevents society from evaluating the level of services provided versus the level of resources retained.Because the nonprofit sector has no owners, there is less oversight than in the for-profit sector over operations and finances and. as a result, financial reporting. While publicly- Examining the Determinants of Nonprofit Accounting Basis Choicetraded companies' financials are regulated by the Securities and Exchange Commission and overseen by investors able to remove capital for accounting vExamining the Determinants of Nonprofit Accounting Basis Choice
iolations, most nonprofits are overseen only by thcừ states’ Attorneys General. Authority and enforcement efforts from these offices vary greatly betwExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choicelly Accepted Accounting Principles (GAAP). One important difference between the Form 990 and GAAP is that the Form 990 permits a nonprofit organization to report its financial statements on either a cash or accrual basis of accounting, whereas GAAP requires accrual reporting.Why. then, do some organ Examining the Determinants of Nonprofit Accounting Basis Choiceizations choose to comply with GAAP and present their public financial statements on the accrual basis while others do not? The issue is one of importExamining the Determinants of Nonprofit Accounting Basis Choice
ance for the nonprofit sector field as a whole, with implications for nonprofit governance and regulation. Prior authors have assumed that organizatioExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choicer oversight of nonprofits are more important determinants.This paper seeks to empirically test what characteristics differentiate organizations that report on a cash (or modified cash) basis of accounting and those that report on an accrual basis of accounting, one of the most basic of all GAAP conc Examining the Determinants of Nonprofit Accounting Basis Choiceepts. The first section describes the policy relevance of studying the basis of accounting choice made by nonprofit organizations. The3second sectionExamining the Determinants of Nonprofit Accounting Basis Choice
outlines the existing literature on nonprofit oversight and the effect this oversight has on financial reporting quality and. by extension, the accounExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choicecial data available on nonprofit organizations. The fourth section proposes a model that seeks to differentiate the characteristics of nonprofits that use cash versus accrual reporting. Research hypotheses and variable definitions are also presented within this section. The fifth section presents re Examining the Determinants of Nonprofit Accounting Basis Choicesults and robustness tests, with a final section discussing the results.Policy Relevance of Basis of Accounting Choice in the US Nonprofit SectorWhethExamining the Determinants of Nonprofit Accounting Basis Choice
er an organization chooses to use cash or accrual reporting has implications both for the individual organization and for society as a whole.OrganizatExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choiceined time period. From an individual organization perspective, this failure to match revenues and expenses makes it impossible for a nonprofit to know what its financial performance. While a nonprofit may rationally choose to operate at a loss for some mission purpose, management needs to know that Examining the Determinants of Nonprofit Accounting Basis Choicethis is the case so that it can ensure the long-term feasibility' of the organization, since losses cannot be sustained in perpetuity.If revenues andExamining the Determinants of Nonprofit Accounting Basis Choice
expenses are not matched, the economic worth of the organization is unknowable. All organizations need resources in order to sustain, update, or expanExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choicerwise their relevance is diminished.An extension of this failure to match revenues and expenses within a fiscal period, an organization that uses cash accounting has no accurate information on its net worth (net assets) and true costs (see Appendix A for an illustration of the difference between cas Examining the Determinants of Nonprofit Accounting Basis Choiceh and accrual reporting). Without these, a nonprofit cannot determine whether or not sendees are profitable, rendering cost accounting impossible. WhiExamining the Determinants of Nonprofit Accounting Basis Choice
le a nonprofit may not wish to maximize profit as a for-profit entity, knowing that services only break even or lose money is valuable. For example, iExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choice 5 PerspectiveOnly accrual accounting and reporting allows an accurate assessment of organization net worth. Society provides billions of dollars in annual subsidies to nonprofits through taxdeductible donations and government contracts, income tax exemptions, and access to tax-exempt debt markets. Examining the Determinants of Nonprofit Accounting Basis ChoiceAccording to the US Treasury Department, charitable tax deductions by taxpayers will reduce federal income tax revenue (“tax expenditures”) by $40 bilExamining the Determinants of Nonprofit Accounting Basis Choice
lion in 2005, representing a substantial annual public subsidy to nonprofit organizations. This figure does not include foregone tax revenues to stateExamining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choiceially in managing financial resources (Light 2008). The use of a non-GAAP reporting basis in required financial statements does nothing to alleviate these public concerns that resources are5being managed and used effectively.Because of these subsidies, society may wish to determine whether the optim Examining the Determinants of Nonprofit Accounting Basis Choiceal level of sendees has been provided. The only way to make this determination accurately is through the analysis of net assets measured on an accrualExamining the Determinants of Nonprofit Accounting Basis Choice
basis, which is the only way that allows an economic interpretation of available resources. Cash accounting will simply reflect inflows and outflows Examining the Determinants of Nonprofit Accounting Basis ChoiceThad CalabreseDoctoral CandidateRobert F. Wagner Graduate School of Public Service. New Examining the Determinants of Nonprofit Accounting Basis Choiceon the timing of receipts and payments, cash accounting cannot provide a true surplus or deficit for the fiscal period under examination (see Appendix A for an example). Since cash accounting cannot provide a true economic measure of surplus or deficit, it cannot, by definition, provide an accurate Examining the Determinants of Nonprofit Accounting Basis Choicemeasure of net assets since net assets is the balance sheet category where annual surpluses and deficits accumulate. Finally, since accrual accountingExamining the Determinants of Nonprofit Accounting Basis Choice
is less open to manipulation than cash accounting, society may desire that publicly supported nonprofit organizations report in a manner that is lessGọi ngay
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