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This Seventh Edition is filled with authoritative advice on the financial reporting, accounting, and control situations unique to not-for-profit organizations. It contains discussions of the accounting and reporting guidelines for different types of organizations, complete guidance on tax and compliance reporting requirements, illustrated explanations of various types of acceptable financial statements, and much more!

The Tax Reform Act of 1986 created a new tax credit as an incentive for the acquisition, new construction, or substantial rehabilitation of housing for tenants with low to moderate incomes. Corporate investors must understand numerous accounting and financial reporting issues because a properly structured investment could have a beneficial impact on reported earnings. A common form of investment in qualified tax credit housing is a 2-tiered limited partnership. Most corporate investors would prefer to account for their investment under the cost method because the effect on reported earnings and financial position is most favorable. The accounting method available to the investor depends upon the investor's relative ownership position and the degree of influence the investor has on the management of the partnership. There are differences between income recorded for book and tax reporting purposes under both the equity and cost methods.

The Securities & Exchange Commission's (SEC) Financial Reporting Release (FRR) 36 provides additional guidance on disclosure matters required in Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). The general purpose of the MD&A requirements is to give investors an opportunity to view the registrant through the eyes of management by providing historical and prospective information on the company's financial condition and results of operations. FRR 36 provides illustrative examples of MD&A disclosures that the SEC considers adequate. The Financial Accounting Standards Board's (FASB) Emerging Issues Task Force (EITF) addressed the treatment of costs incurred for the removal of asbestos. The EITF's findings include: 1. Costs incurred to treat asbestos within a reasonable time after acquiring a property with a known asbestos problem should be capitalized as part of the cost of the acquired property. 2. Asbestos treatment costs that are charged to expense are not extraordinary items as defined in Accounting Principles Board Opinion 30.

The Tax Reform Act of 1986 created the Low Income Housing tax credit as an incentive for acquisition, new construction, or substantial rehabilitation of housing for tenants with low to moderate income. Over a 10-year period, the tax credit may be as high as 90% of the depreciable cost of the building and improvements. A properly structured investment in a low-income housing tax credit partnership can have a beneficial impact on reported earnings and the financial position of the corporate investor. A 2-tiered limited partnership is a common form of investment in qualified tax credit housing. It appears that the equity method of accounting should be used for an investment representing between a 20% and 50% interest in a low-income housing partnership that does not otherwise exercise control over the partnership's operations. It can be argued that an investor with less than a 20% limited partner interest should be allowed to use the cost method of accounting for its investment.

Statement of Financial Accounting Standards (SFAS) 98 significantly alters accounting methods for sales and leasebacks involving real estate. It became generally effective for transactions entered into after June 30, 1988. SFAS 98 specifies that a sale and leaseback transaction involving real estate or real estate with equipment must qualify as a sale under the provisions of SFAS 66, Accounting for Sales of Real Estate. Sale and leaseback accounting should be used if the transaction meets these criteria: 1. It is a normal active-use leaseback. 2. There is adequate initial and continuing investment by the buyer-lessor. 3. There is no continuing involvement by the seller-lessee. Both SFAS 66 and SFAS 98 preclude sale accounting if the seller has an obligation or an option to repurchase the property or if the buyer can compel the seller to repurchase the property. A lease involving real estate must transfer ownership of the property at or shortly after the end of the lease term to qualify as a sale-type lease.

The Financial Accounting Standards Board's (FASB) Emerging Issues Task Force has reached a consensus on the following issues: 1. that certain guidelines should be applied by the seller when a real estate sales transaction involves various forms of financing (Issue 88-24), 2. that a sale of mortgage loan servicing rights should not be recognized before the closing of the sale, that is, until the title and all risks and rewards have irrevocably passed to the buyer (Issue 89-5), 3. that full gain recognition is not appropriate for transactions in which an enterprise transfers its ownership of an individual asset to a newly created entity in exchange for an ownership interest in that entity (Issue 89-7), and 4. that collateral in an in-substance foreclosure should be recorded at fair value (Issue 89-9). The FASB also issued a proposed Statement of Financial Accounting Standards dealing with disclosures of information about financial instruments with off-balance-sheet risk and financial instruments with concentrations of credit risks.

The Financial Accounting Standards Board's new Statement of Accounting Standards (SFAS) 98 addresses many significant lease accounting issues. \"Lease term\" now includes all periods covered by ordinary renewal options during which a loan from the lessee to the lessor is expected to be outstanding. It also includes any and all periods for which failure to renew the lease imposes such a penalty on the lessee that, at the inception of the lease, renewal appears to be reasonably assured. This new definition will result in a greater number of leases being classified as capital leases. Under SFAS 98, sale and leaseback accounting should be used if a transaction involves the following: 1. a normal, active-use leaseback, 2. adequate initial and continuing investment by the buyer-lessor, and 3. no continuing involvement by the seller-lessee. The new requirements imposed by this statement may make sale and leaseback transactions less attractive to some owners.

The Financial Accounting Standards Board has issued an Exposure Draft, Employers' Accounting for Post Retirement Benefits Other than Pensions, that could significantly change the methods of accounting most firms use for health care costs, life insurance, and other benefits provided to retirees. The new proposal has 2 major new requirements: 1. All companies would have to adopt accrual accounting starting in 1992. 2. Beginning in 1997, companies' balance sheets must reflect a liability at least equal to the unfunded obligation to retirees and active employees fully eligible to receive benefits. Adopting accrual accounting could have a potentially negative financial impact from the following effects: 1. higher expense, 2. no tax deduction for the higher expense, 3. limited book tax benefit, and 4. significant recorded liabilities. The issuance of the Exposure Draft will surely cause companies to focus on retiree health care plans, not only for financial and economic purposes, but also from a broader business and economic view.