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Business and Policy Areas
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FASB Proposes Significant Endowment Reporting Changes

February 22, 2008

On February 22, 2008 the Financial Accounting Standards Board (FASB) released for public comment Proposed FASB Staff Position (FSP) FAS 117-a, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures. The proposed FSP addresses the accounting implications of the changes made by the Uniform Prudent Management of Institutional Funds Act (UPMIFA). In many states, UPMIFA is beginning to replace the UMIFA (Uniform Management of Institutional Funds Act) as the primary law governing the oversight and management of donor-restricted endowment funds.

The FSP would update guidance in FASB Statement No. 117, Financial Statements of Not-for-Profit Organizations. The proposal would be effective in fiscal year 2008 for the vast majority of independent institutions and the not-for-profit foundations of public institutions. In addition to offering guidance on the net asset classification of donor-restricted endowment funds, the FSP proposes five additional financial statement disclosures:

1. A description of the governing board’s interpretation of the law that underlies the net asset classification of donor-restricted endowment funds
2. A description of endowment spending policy(ies)
3. A description of endowment investment policy(ies)
4. An endowment reconciliation by financial statement net asset class that shows cumulative investment returns in the permanently restricted net asset class that relate to the organization’s interpretation of relevant law rather than what is required by explicit donor stipulation
5. The composition of an organization’s endowment by financial statement net asset classification that shows donor restricted endowment funds separately from board designated endowment funds.

Proposed FSP 117-a has a 60-day comment period.  NACUBO encourages independent institutions, public institutions with foundations, and the not-for-profit foundations of public institutions with endowments to comment by the April 18, 2008 deadline.  NACUBO will be writing a comment letter and encourages members to share their thoughts by contacting Sue Menditto, director of accounting policy.

For more details, read the entire FSP and plan to attend the NACUBO Webcast on this topic on March 20, 2008, in which FASB staff will participate.  

NACUBO Contact: Sue Menditto, director, accounting policy


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