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FASB’s Technical Agenda for NFP Financial Statements Project Organized in Two Phases

AAFCPAs would like to make you aware of the two phases that comprise the technical agenda for FASB’s Nonprofit Financial Statement Project.  On April 22, 2015, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) entitled Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities. This ASU is intended to improve existing standards for financial statement presentation by nonprofit organizations.

In accordance with its current Technical Plan, the FASB is in the process of deliberating these comments, and has separated the project into two phases.

Phase One

Phase One includes the following topics from the proposed ASU that are not dependent on other projects and that are improvements the FASB might finalize in the near term:

  1. Net asset classification scheme, including:

a. Disclosure of board-designated net assets
b. Underwater endowments
c. Placed-in-service option for expirations of capital restrictions

  1. Expenses and investment return, including

a. Expenses by nature and an 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. Enhance disclosures about cos allocations

  1. Operating measure: modest improvement to disclosures for those that use an operating measure, especially about board appropriations, designations and similar transfers
  2. Improving disclosures of information (both quantitative and qualitative) useful in assessing liquidity
  3. Statement of cash flows: methods of presenting operating cash flows (direct/indirect)

Phase Two

Phase Two includes proposed changes likely to require more time to resolve because they involve consideration of alternatives suggested by stakeholders the Board did not previously consider or are related to similar issues being addressed in other projects:

  1. Operating measures, 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)
c. Alternative disaggregation approaches suggested by stakeholders

  1. Statement of cash flows: realignment of certain line items.

It is expected that phase one of the proposed update will be completed and the final ASU will be issued by mid-2016.  The deliberations for phase two of the proposed update are anticipated to begin after the completion of phase one.

AAFCPAs will continue to follow the Board’s deliberations closely.  As always, we will keep you appropriately informed and provide further updates as they become available.

If you have any additional questions about how the new ASU will impact you, please contact your AAFCPA partner, or Matt Hutt, Partner at 774.512.4043,