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Business and Policy Areas
Business and Policy Areas

FASB Proposal Addresses Donated Securities

May 3, 2012

The Financial Accounting Standards Board (FASB) has proposed an Accounting Standards Update (ASU) to clarify how the statement of cash flows presents donated securities. The proposed ASU seeks to address the diversity in practice among not-for-profit entities (NFPs) about how they classify cash receipts that arise from the sale of certain donated securities.

While many independent colleges and universities regularly receive cash contributions from donors, some donations arrive in the form of appreciated securities to accommodate a donor's tax goals. Institutions that accept such securities typically have policies requiring immediate sale of the securities to limit the impact of market movements on the donation's value. Reporting of liquidated donated securities in the statement of cash flows, however, lacks consistency: Some institutions report such amounts as operating cash flows, while others report them as investing cash flows.

The proposed ASU would require a NFP, in the statement of cash flows, to classify cash receipts from the sale of donated securities in a manner consistent with cash donations received. Generally, the cash receipts from the sale of donated securities would be classified as cash inflows from operating activities. However, if 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 sale proceeds cash would be classified as cash flows from financing activities.

The FASB proposal attempts to line up cash flow reporting for liquidated donated securities with the cash flow reporting of cash donations for either unrestricted (operating activities) or longer term restricted purposes (financing activities). The AICPA Not-for-Profit Expert Panel, the impetus behind the proposed ASU, brought the issue to the FASB's attention several months ago. FASB's Emerging Issues Task Force discussed the issue at its March 2012 meeting and reached consensus; the board quickly ratified the proposal and exposed it for comments on April 17, 2012. Comments are due to the FASB by July 16, 2012.

NACUBO suggests that independent institutions read the proposal and submit comments. Alternatively, institutions can submit reactions to NACUBO to inform the industry comment letter.

NACUBO's staff resource is Sue Menditto, director, accounting policy.


Sue Menditto
Director, Accounting Policy