Loan origination costs are fees charged to reimburse the lender for origination activities, reduce the nominal interest rate, or other charges directly rated to making the loan. According to GAAP, any difference in the initial amount paid at the date the loan was acquired and the principal amount should be deferred and recognized over the life of the loan and amortized accordingly. Now depending on the type of the loan the costs should either be amortized using the effective interest rate method or the straight-line method. It basically all comes down to the type and terms of the loan. The effective interest rate method is used to show a constant effective yield over the life of the loan, whereas with the straight-line method the costs are amortized equally over the life of the loan, applying the same amount in the beginning and the ending of the loan term. In only certain situations when there are no set payments and/or the principle is not defined is the straight-line method acceptable.
For further information on this topic see FASB codification 310-20-35
Google has recently released a new website – http://www.google.com/nonprofits/ that offers exclusive products and resources to non-profits in order to help organizations expand their impact.
There are three main areas in which Google seeks to assist:
- Reach and engage supporters
- Improve your operations
- Raise awareness for your cause
Here is an excerpt from a March 16th blog entry :
“If you work for a nonprofit, this program provides you with several new benefits. Instead of applying to each Google product individually, you can sign up through a one-stop shop application process. If approved, you can access our suite of product offerings designed for nonprofits: up to $10,000 a month in advertising on Google AdWords to reach more donors, free or discounted Google Apps to cut IT costs and operate more efficiently, and premium features for YouTube and our mapping technologies to raise awareness of your cause. We’ve also developed other online resources such as educational videos, case studies and better ways for you to connect with other nonprofits.”
We encourage all our blog readers to check this out!
For all nonprofit organizations, the allure of immediate fundraising dollars is understandably strong, but planned giving should also be part of your long-term strategy for achieving your important mission. Savvy fundraisers know that bequests, gift annuities, and charitable remainder trusts can provide sustainability for the future.
Join Aronson LLC for a webinar on April 7th where we will give attendees an in-depth overview of these three major components of planned giving:
Focus on Bequests
- Who are your bequest donors and how do you cultivate them?
- What types of bequests do you get and are you promoting them effectively?
Focus on Charitable Gift Annuities
- What is a charitable gift annuity and what obligation is the recipient taking on?
- What legal issues and on-going administrative matters are associated with issuing CGAs?
- Who are your CGA donors and how do you cultivate them?
- How do you determine what rates to issue the CGAs for?
- What is your internal policy for handing these funds?
Focus on Charitable Remainder Trusts
- What are charitable remainder trusts and what is the benefit to the charity?
- Who are CRT donors and how do you cultivate them?
- Do you actively promote CRTs or do donors approach you with their advisors?
- What legal and administrative requirements apply to CRTs?
- What issues are involved in the decision to trustee the assets?
Register today for this free and convenient event that will help you develop a new planned giving strategy or fine tune the one you already have! Panelists will include:
- Robert Brennan–Vice President for University Advancement at Mount St. Mary’s University
- Alex Fritz–Associate Director of Gift Planning for Virginia Tech
- Kathy Ward—Senior Vice President of the American Institute for Cancer Research
|Date:||April 7, 2011|
|Time:||11:00 am – 12:00 pm|
Aronson’s own Larry Rubin was recently quoted in an article by Elizabeth Wasserman for American Express, “Independent Contractor or Employee.”
Rubin says, “IRS and state investigators now typically ask about independent contractors during tax audits. He recommends that companies review facts and circumstances concerning all workers not on payroll, including what work they do and whether they meet IRS standards for qualifying as an employee.
It may be wise to hire a third-party firm to review worker classifications to determine preemptively whether they should given W-2s instead of 1099s. “Doing a worker classification review and voluntarily correcting problems before the government does it for you is money well spent,” Rubin says.
Check out the full article for additional discussion on this important issue.
Discovery Counseling Center of the San Ramon Valley has been under investigation since October 2010. The president and executive director stands charged with four felony counts of grand theft embezzlement of more than $150,000. The alleged embezzler’s bail was $175,000 which is likely just the beginning of the costs involved to fight the charges. It is believed that funds were taken through credit card charges that were paying for personal items, utilities, car maintenance, and airline tickets to Yosemite. The missing funds were discovered after an accusation of misconduct led to the organization having their first ever financial statement audit.
See more about the unfolding case here.
There has always been a bit of a gap in official accounting guidance for nonprofits. There is no individual board in place to focus solely on non-profit accounting issues. Get ready for some acronyms! The hierarchy of standard setting in the simplest terms goes like this:
- Most of the rulings are first set for public companies by the Public Company Accounting Oversight Board (PCAOB);
- Those rules are then adapted for private for-profit companies by the Financial Accounting Standards Board (FASB);
- The FASB then comes up with a non-profit application;
- Ongoing issues where it becomes additional guidance is needed may be addessed by the Emerging Issues Task Force (EITF).
This trickle-down guidance creates some challenges and foggy grey territory for non-profits to wade through. With the ongoing move towards International Financial Reporting Standards (IFRS) there has been some increasing concern over where that leaves the non-profits. IFRS doesn’t address non-profit issues because for the most part, the rest of the world doesn’t have a non-profit sector. Either their governments take care of it or it doesn’t happen. If/when the U.S. moves completely to IFRS, the FASB will become an outmoded entity. Continue reading »
We had the pleasure of interviewing Lisa Gurwitch, Esq. who currently is a senior vice president of World Learning (a nonprofit devoted to international education, development and exchange programs). She previously was the Executive Director and Director of Gift Planning of the Jewish Community Endowment Fund of the Jewish Community Federation of San Francisco. In these positions she has worked with a multitude of donors in a gift planning context and also has been heavily involved in donor education about various gift types and income and estate planning strategies for planned gifts. She contributed to the growth in assets of almost $3 billion in her 18 years with the Jewish Community Endowment Fund. Our questions and responses were the following: Continue reading »
Just a reminder that not all costs associated with the development or upgrade of a website should be capitalized. The planning phase of the project should be expensed as incurred. Planning consists from everything from deciding how the site should look and function to determining the necessary technology needed. It should also be noted that if research & development is involved those costs should generally be expensed as incurred.
For further information on this topic please see:
FASB codification 350-50-25 & 730-10-55 and our previous blog post that gets into more detail here.
IRS announces new special disclosure initiative with respect to offshore accounts and foreign reporting requirements. Deadline is August 31, 2011.
On February 8, 2011, the IRS announced a second voluntary disclosure program that will give taxpayers with unreported foreign accounts, assets or income an incentive to come forward and get caught up on their overdue tax payment and reporting requirements.
Those taxpayers who reported all their foreign income, but failed to file required disclosure forms during the period 2003 through 2010, including Reports of Foreign Bank and Financial Accounts and Forms 5471, 5472, 926, 8865, and 3520, can file these and attach a statement of explanation by August 31, 2011 and avoid all penalties.
Taxpayers who failed to report all of their offshore income and who come forward and file amended tax returns to pick up the omitted income, file all the required disclosure forms, and pay or make arrangements to pay all overdue taxes (including applicable penalties and interest) by August 31, 2011, will be eligible for reduced penalties for failure to file the required foreign disclosure forms and can ensure that they will not be subject to criminal prosecution. The penalty for failure to file the required disclosure forms will be limited to 25% of the highest aggregate account balance in foreign bank accounts (including the fair market value of foreign assets that were either acquired with improperly untaxed funds or that produced income that was improperly not reported). This penalty is limited to 12.5% if the highest aggregate account balance or the fair market value of tainted assets was at all times less than $75,000. The penalty is reduced further to 5% in very limited special circumstances.
Please contact an Aronson tax advisor at 301.231.6200 if you think that you may be able to take advantage of the new IRS initiative or if you would like more information.
The Patient Protection and Affordable Care Act signed into law by President Obama created a tax credit for small businesses and tax exempt organizations. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax exempt organizations that primarily employ low and moderate income workers. The credit is worth up to 25% of a tax exempt’s premium costs in 2010. More details are available on the IRS web site.
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