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Business and Policy Areas
Business and Policy Areas

FASB Defers Controversial NFP Proposal Items

November 16, 2015

At its October 28 meeting, the Financial Accounting Standards Board (FASB) discussed the summary of feedback received on its proposed Accounting Standards Update, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities, issued in April 2015. Based on that feedback, the Board decided to divide its redeliberations into two workstreams, or phases.

The first phase would reconsider those proposals that are not dependent on other projects and for which feedback received was relatively consistent - either positive or negative. Those proposals relate to:

  1. Changes to the net asset classification scheme, including:

a. Disclosure of board-designated funds.
b. Reducing net assets to two classes (with and without donor restrictions).
c. Underwater endowments reducing net assets with donor restrictions.
d. Requiring a placed-in-service option for expirations of restrictions on capital assets.

  1. Reporting of expenses, including:

a. A requirement to present and analyze expenses by both nature and function,.
b. Enhanced disclosures about how costs are allocated among functions.
c. Netting of external and direct internal investment expenses against investment return.
d.  Whether netted investment expenses should be disclosed.

  1. Improving disclosures by those not-for-profit entities (NFPs) that choose to present a performance measure.
  2. Improving disclosures of information useful in assessing liquidity.
  3. Method(s) to be used in presenting operating activities in the statement of cash flows.

The second phase would involve reconsideration of other proposed changes that are likely to require more time to resolve. In particular, these changes would involve consideration of alternatives suggested by stakeholders that the Board did not previously consider or that are related to similar issues being addressed in other FASB projects. Those deliberations will include:

  1. Operating measure(s):

a. Whether to require intermediate measure(s).
b. Whether and how to define such measure(s) and what items should or should not be included in the measure(s).
c. Alternative disaggregation approaches suggested by stakeholders.

  1. Realignment of certain line items within the statement of cash flows.

FASB hopes to issue an accounting standards update for the first phase by June 30, 2016. No indication has been given as to the possible effective date for implementing final guidance.


Sue Menditto
Director, Accounting Policy