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Business and Policy Areas
Business and Policy Areas

FASB Gives Go-Ahead for Exposure Draft on NFP Reporting

October 14, 2014

On October 8, staff of the Financial Accounting Standards Board (FASB) provided board members with a summary of the proposed changes to date to the not-for-profit (NFP) reporting model and an analysis of potential costs, benefits, and complexities of implementing those changes. In addition, the staff requested that the Board approve drafting of a proposed Accounting Standards Update (ASU).

Much of the implementation analysis was based on comments received from the FASB NFP Advisory Committee (NAC).The staff noted that while NAC members generally agreed with the proposed changes, further deliberations should be considered in two areas: capital-like transactions; and board designations, appropriations, and similar transfers. As a result of those redeliberations, the Board made changes to some of its previous decisions.

Capital-Like Transactions

The Board tentatively decided that an NFP should present capital-like transactions in its statement of activities as follows:

  • For gifts of long-lived assets received without donor restrictions, an NFP would report the fair value of the gift as operating revenue in the period received. If the NFP then elects to use the asset in its operations, it would show a transfer of the entire amount of the gift out of operations. Unlike the Board's previous decision in this area, no amounts would be transferred back into operations in subsequent periods.
  • For gifts of cash restricted for the purchase or construction of long-lived assets, an NFP would report an increase in net assets with donor restrictions. When the donor's restriction is met, the amount of the gift would be shown as a release of restrictions within operations. The entire amount would then be transferred out of operations. The transfer from operating to non-operating on the statement of activities is consistent with the treatment of an unrestricted gift of a long-lived asset (referenced in the first bullet above).

Board Designations, Appropriations, and Similar Transfers

In an effort to address concerns about the degree of flexibility related to governing board designations, appropriations, and similar transfers in the statement of activities, the Board decided to require an NFP to present all transfers in a separate and discrete section within the statement of activities. Additionally, an NFP would be required to present a subtotal of operating revenues and expenses before such transfers. The transfers would be reported gross, but an entity could aggregate them to reflect, at a minimum, the total of transfers into operations and the total of transfers out of operations. NFPs that aggregate transfer amounts would be required to show the detail in a note. The note would also need to explain qualitative information about the transfers (e.g., board intent, regularity, institutional policy, long lived asset for use in future periods, and so on).

Request to Draft a Proposed Accounting Standards Update

At the conclusion of the meeting, the staff requested, and was granted, the Board's approval to draft a proposed ASU. Once drafted, the proposed ASU will undergo an external (also known as a fatal flaw) review. NACUBO staff and Accounting Principles Council members will participate in the review. Upon completion, the Board will consider any further feedback as well as the overall benefits, costs, and complexities before determining whether to issue a proposed ASU for public comment. Assuming that decision is made, an exposure draft is expected to be issued during the first quarter of 2015 and have an extended public comment period.


Sue Menditto
Director, Accounting Policy