FASB Reaches Tentative Decisions Concerning Its Exposure Draft on the Presentation of Financial Statements for Nonprofit OrganizationsDecember 16, 2015
Reed W. Risteen, CPA
In December 2015 the Financial Accounting Standards Board (FASB) reached the following decisions regarding its proposal advocating changes in financial reporting for non-profit organizations:
Cash Flow Statement
FASB decided not to require NFPs to use the direct method of reporting cash flows, so either the direct or indirect method may be used, which represents no change in current practice. However, if the direct method is used, the indirect reconciliation of operating activities is no longer required, but optional.
The FASB reaffirmed its proposal to recognize two types of net assets, “with donor restrictions” and “without donor restrictions,” essentially combining the current “temporarily restricted” and “permanently restricted” categories. Disclosures in the notes to the financial statements would describe the types of donor restrictions.
The FASB also affirmed its proposal to require disclosure of board-designated net assets, either on the face of the statement of financial position or in the notes.
The FASB affirmed its proposal to require that underwater endowment funds be classified within net assets with donor restrictions rather than unrestricted net assets, as is currently the case.
The following disclosures about underwater funds have been affirmed:
- The organization’s policy to either reduce expenditures or not spend from underwater funds
- The aggregate fair value of the underwater funds
- The aggregate historic dollar amount
- The aggregate amount of the deficiency
Expiration of Restriction to Acquire or Construct Long- Lived Assets
The FASB affirmed its proposal to require that restricted contributions used to fund acquisition or construction of long-lived assets be released in full when the asset is placed in service, thereby eliminating the option to release restrictions over the life of the property.
If you have any questions regarding your organization's governing documents, please contact Lori Budnick at firstname.lastname@example.org or 860.561.6828.