Currently our NPO is depreciating assets on a straight-line basis. The organization can receive grants to purchase assets. The grant is received and accounted for as revenue. Following depreciation rules the item is depreciated over a period of years. As an NPO the organization is at times required to spend the grant in the year received. During the year Board members monitor the Statement of Operations to measure how the organization's progress. However, since the asset is only fractionally expensed, (e.g. one fifth of the cost), the expense is understated leaving the impression that the organization has additional dollars to spend. Are their Canadian accounting rules that would allow NPO's in this case fully expense the asset?
Canada Depreciation for NPO's
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bklynboy
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Why arent they looking at a cash flow statement if they want to understand the sources and uses of cash? An income statement simply shows the revenues and expenses each period to derive the eaernings. Since you will have the use of this asset for a period of time, depreciating is the right answer (expense is not understated). Seems to me an education needs to take place to those who think net income is the same as a cash account instead of trying to expense in full.