FASB Not-For-Profit Financial Statements Project Update
Phase I (expected to be released later in 2016)
Net Assets Classes
- Financial statement presentation – Combine temporarily and permanently restricted net assets into net assets with donor restrictions and rename unrestricted net assets net assets without donor restrictions. Consistent with the proposed Update, this alternative would retain the current generally accepted accounting principles (GAAP) requirement to provide relevant information about the nature and amounts of donor restrictions on net assets (either on the face of the statement of financial position or in the notes).
- Disclosures – Require disclosure of the amounts and purposes of board-designated net assets either on the face of the financial statement or in the notes.
- Underwater endowments – Require that the aggregate amount by which endowment funds are underwater be classified within net assets with donor restrictions, rather than the current unrestricted category. Also require the disclosure of:
- The not-for-profit’s policy to either reduce expenditures or not spend from an underwater endowment fund
- The aggregate fair value
- The aggregate original endowment gift amount, or level required by donor stipulations or by law to be maintained
- The aggregate of the amount of the deficiencies
- Long-lived assets constructed or acquired with donor-restricted net assets – Require that, in the absence of explicit donor instructions, the placed-in-service approach for expirations of restrictions to acquire or construct long-lived assets be used, thus eliminating the over-time approach.
- Expenses – Report expenses by nature, with analysis of expenses by function and nature; investment expenses netted against investment income
- Disclosures – Enhanced disclosures about cost allocations
Operating Measures – Modest improvements for disclosures for those using operating measures.
Liquidity – Explore an approach that would require, like the proposal, qualitative information about how the not-for-profit manages its liquidity and liquidity risks, but provide alternative ways of presenting quantitative information. This approach would emphasize information about assets that are liquid and available at the balance sheet date.
Statement of Cash Flows – Permit use of either the direct or indirect method of cash flows. If direct, no longer required to do indirect reconciliation.
Phase II (longer-term consideration)
Operating Measures – All elements other than modest improvement to disclosures
Statement of Cash Flows – Realignment of certain items
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