Why We Evaluate the Financial Bottom Line in Three Ways
Unrestricted surplus (deficit) is the bottom line figure that appears in most financial audits, although we run it here without depreciation. Unrestricted revenue includes funds generated through regular operations; it may also contain capital gains or losses and unrestricted activity not related to delivery of regular activities and programs, such as donor-restricted contributions whose restrictions are met in the same fiscal year the gift is made. It often presents a more positive view of revenue, and therefore the bottom line, than when considering operating revenue alone.
Operating revenue and capital are often conflated in audited financial statements, as is the case in the examination of unrestricted surplus (deficit). This practice, while compliant with generally accepted accounting principles, can mask actual operating performance by making an organization look more profitable than it actually is. For this reason, we also report on two bottom line measures that include only unrestricted operating revenue: one with depreciation included and one without.