A nongovernment, not-for-profit environmental organization conducts a mailing about the dangers of global warming. Included in the mailing is a request for donations. How should this activity be reported be in the statement of activities?

Question

Quizplus · Accepted Answer

According to Generally Accepted Accounting Principles (GAAP), expenses related to soliciting donations should be classified as fund-raising expenses unless certain criteria are met. These criteria include activities that both solicit and educate, where the primary purpose is education, and where the solicitation is a minor part of the activity. In this case, the organization is conducting a mailing about the dangers of global warming, which could be considered an educational activity. However, since a donation request is included, it is safest to classify it as a fund-raising activity unless the organization can demonstrate that the primary purpose was educational. Therefore, the activity should be reported as fund-raising, unless certain criteria are met.

A Nongovernment, Not-For-Profit Environmental Organization Conducts a Mailing About the Dangers