FASB Issues ASU on Treatment of Donated Securities
November 1, 2012
The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2012-05, "Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows," which clarifies how cash received from the sale of donated securities should be presented in the statement of cash flows. The ASU eliminates the current diversity in practice among not-for-profit entities (NFPs) in this area.
Many independent colleges and universities, and the affiliated NFP foundations of public institutions, receive contributions in the form of appreciated securities to accommodate a donor's tax goals. These institutions typically have policies requiring the immediate sale of the securities to limit the impact of market movements on the donation's value. Until now, reporting of the cash received from liquidated donated securities in the statement of cash flows has lacked consistency. Some institutions have reported such amounts as operating cash flows, while others have reported them as investing cash flows.
The ASU requires an NFP to classify cash receipts from the sale of donated securities in a manner consistent with cash donations received. The ASU makes cash flow reporting for liquidated securities consistent with cash flow reporting of cash donations for either unrestricted purposes (operating activities) or longer term restricted purposes (financing activities). Generally, cash receipts from the sale of donated securities would be classified as cash inflows from operating activities. If, however, the donor restricted the use of the contributed securities to long-term purposes - for example, to establish or increase an endowment or to acquire, construct, or improve long-lived assets - the cash proceeds from the sale of the securities would be classified as cash inflows from financing activities.
The ASU is effective prospectively for fiscal years beginning after June 15, 2013, with early adoption permitted. For fiscal years beginning before October 22, 2012, early adoption is permitted if the NFP's financial statements for those fiscal years have not yet been made available for issuance. The ASU can be accessed on the FASB's website.
Director, Accounting Policy
- NACUBO Statement on Endowment Inquiry
- NACUBO Urges One-Year Postponement of Changes to 1098-T Reporting Requirements
- GASB Addresses Asset Retirement Obligations and Seeks Field Testers
- 2016 Higher Education Accounting Forum
April 10-12, 2016
- 2016 CAO and CBO Collaborations
August 1-2, 2016
- 2016 Planning and Budgeting Forum
September 19-20, 2016
- WEBCAST: Legislative Lunchcast: A 30-Minute Washington Update from NACUBO
Monday, February 22, 2016 12:00pm ET
- WEBCAST: Responsibility Center Management: Two Different Perspectives
Thursday, March 17, 2016 1:00PM ET
- WEBCAST: Title IX: Key Issues Surrounding Institutional Compliance
Wednesday, April 20, 2016 1:00PM ET
- WEBCAST: The Clery Act: Strategic Planning to Mitigate Institutional Risk
Thursday, May 26, 2016 1:00PM ET
- ON-DEMAND: NACUBO Live! Results of the 2015 NACUBO-Commonfund Study of Endowments
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis