CPA Exam Lab
Section 1: 30–40%1B1

Statement of Financial Position (NFP)

NFP accounting feels foreign because it throws out the equity section entirely and replaces it with net assets. The AICPA's biggest trap: asking whether a board designation converts unrestricted net assets into restricted — it does NOT. Only external donors create restrictions. Get the three-class net asset model straight and the rest of NFP falls into place.

What AICPA Wants You to Know

  • 1Describe the two classes of net assets under ASU 2016-14 and what goes in each
  • 2Identify how NFP assets, liabilities, and net assets are classified on the balance sheet
  • 3Distinguish between donor restrictions and board designations
  • 4Apply the NFP investment reporting standards (pooled investments, fair value)
  • 5Recognize what triggers a reclassification between net asset classes