Final answer:
The components of net assets in NFP organizations include unrestricted, temporarily restricted, and permanently restricted net assets, reflecting the presence or absence of donor-imposed restrictions.
Step-by-step explanation:
The components of net assets of Not-For-Profit (NFP) organizations can be likened to the concept of Net National Product (NNP), which is calculated by taking the Gross National Product (GNP) and subtracting depreciation. However, for NFP organizations, net assets typically consist of three main groups: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. These categories reflect donor-imposed restrictions or the absence thereof.
Unrestricted net assets are not subject to donor-imposed stipulations and can be used at the discretion of the organization's management for any purpose that supports the organization's operations. Temporarily restricted net assets are those that are subject to donor-imposed restrictions that will be met by actions of the organization and/or the passage of time. Permanently restricted net assets, on the other hand, are funds that must be maintained intact in perpetuity, usually because the donor has stipulated that the principal cannot be expended and only the income from these assets can be used.