FASB Not-for-Profit Project Update

Posted on Wednesday, June 01, 2016

In April 2015, FASB issued an exposure draft of proposed changes to nonprofit financial statements.  As a result of the feedback, at the October 28, 2015 board meeting, the FASB recommended a redeliberation plan for the proposed changes.  The plan has been divided into two phases.

Phase 1

1.      Net asset classification scheme and related issues

a.      Two classes of net assets

b.      Disclosure of amounts and purposes of board designated net assets

c.      Underwater endowments

d.      Placed-in-service option and elimination of over-time option for expirations of capital restrictions.

2.      Expenses

a.      Expenses by nature and analysis of expenses by function and nature

b.      Netting of external and direct internal investment expenses against investment return

c.      Disclosure of netted investment expenses

d.      Enhanced disclosures about cost allocations.

3.      Operating measure: Improved disclosures for those not-for-profit entities that choose to present such a measure.

4.      Information useful in assessing liquidity.

5.      Statement of cash flows: Methods of presenting operating cash flows.

Phase 2

1.      Operating measure: All other elements of the proposal not addressed in Phase I, including:

a.      Whether to require intermediate measure(s)

b.      Whether and how to define such measure(s) and what items should or should not be included in the measure(s).

2.      Statement of cash flows: Realignment of certain line items.

The FASB board continued to redeliberate Phase 1 at the March 30, 2016 board meeting and made a decision regarding the transition method and effective date for the changes. 

Transition Method – Nonprofits should apply the amendments on a retrospective basis for all years presented.  However, if presenting comparative financial statements, nonprofits would have the option to omit the following information or any years presented before the year of adoption:

1.      Analysis of expenses by both functional and natural classification.

2.      Disclosures around liquidity and availability of resources.

Effective Date – The amendments would be effective for financial statements for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018.  The board also decided to permit early adoption subject to the transition method above.

To read more about the proposed changes see DWD’s previous blogs:

FASB Not-for-Profit Project: Statement of Financial Position

FASB Not-for-Profit Project: Statement of Activities and Functional Expenses

FASB Not-for-Profit Project: Statement of Cash Flows

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

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