Copyright © 2002, United States Conference of Catholic Bishops, Inc. All rights reserved.
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Many dioceses operate cemeteries. These may be legally separate not-for-profit corporations, or they may be divisions operating within the central administrative offices. The accounting for these operations is the same regardless of the corporate structure.
Generally accepted accounting principles (GAAP) for cemeteries are covered in the Practitioners Publishing Company's Guide to Preparing Nonprofit Financial Statements. What may be unique is a discussion of the accounting policies and disclosures in the following areas:
Each of these areas will be discussed below.
- Net asset classes
- Revenue recognition policies for deferred service contracts
- Rights of return
- Amortization of developed space
- Installment sales contracts
Net Asset Classes
The net assets of cemeteries are typically classified in the financial statements as unrestricted based upon the absence of donor-imposed restrictions. Many cemeteries, however, designate a portion of unrestricted net assets for permanent maintenance and future development. Some cemeteries operate in accordance with state laws that require a set-aside of sales contracts for permanent maintenance funds and for future development funds. Such laws may require that the principal shall remain inviolate. The net assets could therefore fall into any one of the following categories:
These are further discussed in order below.
- Unrestrictedóoperating (includes net assets invested in land, building, and equipment)
- Unrestrictedódesignated for future development or for permanent maintenance
- Unrestrictedóassets held for limited use
- Temporarily restrictedódonor-imposed
- Permanently restrictedódonor-imposed restrictions (such as trust funds)
Undesignated unrestricted net assets. These represent general operations of the cemeteries.
Unrestricted designations for future development or permanent maintenance. Some cemeteries internally designate a portion of the unrestricted net assets for future development or permanent maintenance. These designated net assets are to be held by the cemeteries and are to be used solely for development and maintenance of cemetery grounds. Such designations may be contractually stipulated. Such designations may be redesignated by the cemeteries because they do not represent funds restricted by a donor.
Unrestricted assets held for limited use. Certain states have a requirement that a portion of the sales for lots, crypts, and niches be set aside for permanent maintenance funds. In some cases, the principal is to remain inviolate.
Temporarily restricted funds. In the event a contribution is made to the cemetery that is restricted by time or purpose, the unexpended portion is presented as temporarily restricted.
Permanently restricted. Certain purchasers of lots, crypts, and niches within a cemetery may donate funds for special care of the individual burial spaces in addition to the normal costs for burial. They stipulate that the earnings are to provide special care over and above the normal permanent maintenance. By donor intent, these funds are permanently restricted. The earnings on the funds would be used to provide this required special care and treated as current revenue. Any unused earnings would be treated as temporarily restricted until the required special care is provided.
Revenue Recognition for Deferred Service ContractsTypically revenue is recognized upon the execution of a contract at the time a contract is signed. Some sales contracts provide for the option to prepay burial or other service fees. Such prepayments are reflected as deferred revenues and are recognized as revenue when the burial or other service is performed.
Rights of ReturnSome cemeteries have sales contracts that provide for the right of return for a definite period. A provision for cancellation of those sales contracts written in prior years is recorded in the financial statements based upon historical experience.
Amortization of Developed SpaceInventory of developed space is recorded at estimated historical cost. The cost of each space sold is based on an allocation of total expenses incurred in developing the burial space. Amortization of the space is computed on a basis of space sold and is recorded in cost of sales at the time of sale.
Installment Sales ContractsSome cemeteries allow customers to purchase contracts on the installment method. A provision for interest in accordance with Opinion No. 21 of the Accounting Principles Board (APB) of the American Institute of Certified Public Accountants needs to be considered if the interest rate is below market.