While we do capitalize restoration work, we do not depreciate it, but establish the book value as an historic record of the cost of the work. If expensed, we would need to string together many accounting periods (one restoration is over 25 years and counting) to show the full cost. Carrying it as an asset, it moves into each accounting period as a record of "how much have we spent on this thing."
By the way, our accountants are continually after us for a depre sched of the collection. We've never offered one.

wyld@sbcglobal.net

Scott & Superheater

I agree in using accrual for everything , and I am certainly not suggesting anyone to switch. Running daily on a true cash basis is just spending with blinders on, most small businesses that due use it are just doing a year end adjustment on Dec 31 and reversing it on Jan1. Projection of AR & AP still needs to happen well beyond just looking at a monthly P&L Statement. Let me ask , What is the benefit (if there is one) or reasons to having Pledged donations and grants on your books prior to recieving them?

Rich Young

We do not book pledges, but we do track them in a fundraising database. We usually include them in our published results. Nearly all the time, using relationship fundraising with known donors, there is no attrition of donations vs. pledges. When a pledge falls through, it is difficult to replace the money because we may have already stated that we reached our goal in "gifts and pledges".

We use cash basis and do accrue at year end as you suggest. Accrual is difficult for us because at a volunteer museum with several purchasers, we may not see the invoice until it's nearly due. The paperwork process is cumbersome at best. We do have a budget and a monthly expense to budget report that is helpful in curtailing excessive spending. Material expenses over budget require an approval process and some budget line items are frozen at budget by the Officer in charge of that line item. We do cash basis and are not actually "spending blind."

wyld@sbcglobal.net

> I think that although I've advocated accrual accounting, a case can be made for NOT accruing pledges in keeping with the "conservatism" principle of accounting-especially and at least for internal purposes. Its simply more proper to accrue liabilities and expenses than revenues and assets.

If I were doing your books, I'd do just that unless:

I was preparing books in accordance with GAAP for an audit and it was prescribed to accrue pledges-which I'd need to research to say yes this is required.

Pledges are gratutitious transfers with no exchange of value. As such, unless "detrimental reliance"-where action is reasonably taken as a result of a promise- comes into play-and as I understand it, that's limited-promises are not enforceable at law. (perhaps one of the barristers can address)

This not like how in certain industries, where revenue is recognized (booked) as an estimate as a project is partially completed. In that case-you have legal recourse because of an enforceable contract.

As for the suggestion-there'll always be expenses such as utilities that are unknown until invoiced. Over time, they can be estimated. If you are running a $300,000 annual budget and your $600 dollar heating bill is estimated at $500, well, that shouldn't be a tremendous problem.

However, centralize purchasing-using sequentially ordered purchase orders that must be used above a pre-established thresholdhold amount. You'll have a much better picture of your position.



Superheater@rrmail.com

> However, centralize purchasing-using
> sequentially ordered purchase orders that
> must be used above a pre-established
> thresholdhold amount. You'll have a much
> better picture of your position.

When our organization has up to 80 volunteers show up on any given weekend and at the drop of a hat may need to "run to town" to pick up supplies, tools etc., it is impossible to "centralize". In principle, I would LOVE to impose centralized control, however, it would require a cell phone surgically imbedded in my head since I would get calls all week and thoughout the weekend. Since I have two real jobs and kids activities as well as others, I cannot allocate the time.
No invoice is paid without budget authorization and those who have abused purchases have been banned from further credit purchases in the past.
It is assumed that folks who give so much will not take us for a ride.

wyld@sbcglobal.net

> I think I may have spent too much time in the land of cubicles... i forget sometimes how the nitty gritty gets done.



Superheater@rrmail.com

> I read a SUMMARY of FASB 116, it appears to have taken position that contributions are earned when received. You seem to be adhering to GAAP handling contribs as you do.
> as

Superheater@rrmail.com