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Business and Policy Areas
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FASB Reaches Conclusions on UPMIFA and Endowment Accounting

June 12, 2008

On June 4, 2008 the Financial Accounting Standards Board (FASB) considered issues raised by constituents to the proposed FASB Staff Position (FSP) 117-a, "Endowments of Not-for-Profit Organizations:  Net asset Classification of Donor-Restricted Endowment Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures." The board made the following decisions which will be incorporated in the final FSP:

  • As proposed by FSP FAS 117-a, organizations should continue to classify a portion of a donor-restricted endowment fund as permanently restricted net assets, as determined by the organization’s (governing board’s) interpretation of relevant law.  
  •  As proposed by FSP FAS 117-a, organizations should continue to account for "underwater" funds as a reduction of unrestricted or temporarily restricted net assets (rather than as a reduction of permanently restricted net assets), which is consistent with guidance in FASB Statement No. 124, "Accounting for Certain Investments Held by Not-for-Profit Organizations."
  • The portion of an endowment fund that is not classified in permanently restricted net assets should be classified as temporarily restricted net assets, even in the absence of purpose restrictions.  This decision is consistent with the view that UPMIFA extends a donor restriction to the unappropriated portion of an endowment fund, specifically by implying a time restriction.
  • The disclosure requirements proposed by FSP FAS 117-a will be retained and  incorporated into the final FSP except for the elimination of:
    • The proposed disclosure of an organization’s planned appropriation for expenditure, if known, for the year following the most recent period for which the organization presents financial statements
    • The proposed supplemental disclosure to the tabular disclosures of the amount added to permanently restricted net assets because of governing board interpretation of the law.
  • The final FSP will not address requests for additional guidance raised in the comment letters that are outside the scope of the project.
  • The effective date of the FSP will be deferred six months to fiscal years ending after December 15, 2008.  Early application will still be permitted.

It should be noted that the final FSP, which will be issued during the latter half of July, will:

  • Downplay any implication that "plain vanilla" UPMIFA requires maintenance of purchasing power
  • Emphasize and illustrate the existing requirements of Statement 117 to disclose the types of temporary restrictions.  It will illustrate the temporarily restricted net assets subject to a time restriction under UPMIFA, with an additional breakdown into purely time restricted amounts and amounts also with purpose restrictions.

The decision that UPMIFA implies a time restriction in no way extends to the Uniform Management of Institutional Funds Act (UMIFA).

The Board directed the staff to monitor the implementation of UPMIFA and the application of the FSP in practice.  It also directed the staff to begin writing a pre-ballot draft of the final FSP.


The full text of conclusions is available on the action alert section of FASB’s website

The NACUBO staff resource is Sue Menditto, director, Accounting Policy