Assignment: Performance Indicator

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Assignment: Performance Indicator

Assignment: Performance Indicator

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Excess of revenues over expenses (or net income in for-profit organizations) is the operating income plus the nonoperating income minus total expenses. For not-for-profit organizations, AICPA requires excess of revenues over expenses to be reported as the per- formance indicator that reflects the results of operations. Not-for-profit organizations must report the performance indicator in a statement of operations that also presents the total changes in unrestricted net assets. The notes to the financial statements should provide a description of the nature and composition of the performance indicator (AICPA 2012).

stAtement of cHAnges In net Assets

The statement of changes in net assets, called the statement of equity in a for-profit organiza- tion, shows the reasons why net assets changed from the beginning of the statement period to the end of the statement period as reported in summary fashion on the balance sheet. Because AICPA requires not-for-profit organizations to report changes of unrestricted net assets on the statement of operations, many organizations also include changes in temporar- ily restricted and permanently restricted net assets on the statement of operations, which eliminates the need for a separate statement of changes in net assets. This statement is important in showing how the changes in the excess of revenues over expenses affect the net asset, or equity, position of the organization (as was shown in the example in exhibit 3.2).

Unrestricted net assets come directly from the statement of operations and have already been explained in that section. The category temporarily restricted net assets presents the changes in temporarily restricted net assets during the statement period. Within this category (and not shown in exhibit 3.2) are several subcategories.

The subcategory contribu- tions for charity care represents money donated to the hospital for the provision of charity care. Net realized and unrealized gains on investments reflects an increase in the value of the investment (unrealized until sold) and an increase in cash (realized through dividends or interest).

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