D is corrent. According to the AICPA Audit and Accounting Guide, Health Care Organizations, investment returns not restricted by donors are reported on the statement of operations. The statement of operations explains the change in the hospital’s unrestricted net assets for a period. Consequently, investment returns which are permanently restricted would not be reported on the statement of operations. Investment returns which are realized in cash are reported on the statement of cash flows. However, investment returns which are not realized in cash are not reported on the statement of cash flows. Investment returns, whether realized or unrealized, which are restricted by donors are reported on the statement of changes in net assets. Unrealized gains on investments which are permanently restricted represent investment returns which would be reported as an increase in permanently restricted net assets on the statement of changes in net assets.
A is incorrect. According to the AICPA Audit and Accounting Guide, Health Care Organizations, investment returns not restricted by donors are reported on the statement of operations. The statement of operations explains the change in the hospital’s unrestricted net assets for a period. Consequently, investment returns which are permanently restricted would not be reported on the statement of operations.
B is incorrect. Investment returns which are realized in cash are reported on the statement of cash flows. However, investment returns which are not realized in cash are not reported on the statement of cash flows.
C is incorrect because investment returns which are not realized in cash are not reported on the statement of cash flows.
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