NACUBO

My NacuboWhy Join: Benefits of Membership

E-mail:   Password:   

 Remember Me? | Forgot password? | Need an online account?

Business and Policy Areas
Business and Policy Areas
Loading

FASB Discusses Presentation of Investment Expenses

May 15, 2014

At its May 14 meeting, the Financial Accounting Standards Board (FASB) tentatively decided to require Not-for-Profit (NFP) entities to present investment returns net of expenses on the face of the statement of activities. Current guidance allows, but does not require, net presentation of investment expenses for NFPs.

Under the proposed guidance, although investment expenses would be netted against revenue on the statement of activities, investment expenses would need to be presented by nature and included as nonoperating expenses in the functional to natural expense analysis tentatively agreed to at a previous meeting of the Board. This proposed decision would create a, disconnect between the expense analysis and the activity statement because investment expenses would not be shown in the statement of activities. Also discussed at the meeting was the need to provide guidance on which amounts should be included in total investment expense. The Board agreed that broad guidance should be included in the standards rather than an exhaustive list.

Impact on Higher Education

The question of which amounts to include in total investment expense has been a point of discussion for many independent institutions. Because of the many types of costs related to investing activities (management fees, custodial fees, incentive fees, staff expenses, to name just a few) and the ability of NFPs to quantify some of those costs, there has been a lack of consistency across colleges and universities and the entire NFP sector. As a result of the difficulties encountered in determining certain investment-related costs, it will be crucial for the Board to provide guidance that is sufficient to eliminate any inconsistency in reporting investment expenses.

This is the seventh web article in a news series covering FASB decisions that are designed to improve the NFP reporting model. NACUBO staff and members of its Accounting Principles Council will continue advising the Board on this project, remaining in close contact with FASB staff. Look for enhancements to NACUBO's accounting webpage to provide more project details and gather membership feedback in preparation for an industry response to proposed changes when an exposure draft is issued for comment. An exposure draft is expected to be issued before the fourth quarter of 2014. 

Contact

Sue Menditto
Director, Accounting Policy
202.861.2542
E-mail