FASB’s Exposure Draft on Financial Statements of Not-for-Profit Entities
In our previous blog relating to the Proposed Accounting Standards Update Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities we discussed some of the broad sweeping changes included in the FASB’s exposure draft, which was released on April 22, 2015.
The last time the not-for-profit community was asked to comment on significant changes to not-for-profit financial statements was 1993, and that pronouncement was much more focused in scope. Given the breadth of changes being suggested in the current exposure draft, respondents have been given a comment period of 120 days, ending August 20, 2015. Anyone who is interested in weighing in on the proposed changes is allowed to submit comments; there are several ways in which to do so such as through the FASB website or by mailing in a formal letter. Input is being sought from all stakeholders including not-for-profits, donors, board members and accountants. It is important that representatives from each of these groups share feedback so that the FASB has a broad range of opinions to help shape the final version of the draft.
The exposure draft directs those who wish to comment to 22 specific questions relating to the proposed changes. In addition, open feedback is encouraged as well. To assist the community with their responses, the FASB has published three sets of frequently asked questions, the third of which was released July 27, 2015, which can be accessed here. The documents clarify areas such as: (i) taking materiality into account prior to enacting certain areas of the exposure draft; (ii) the types of direct internal expenses that should be netted against investment income; (iii) limiting liquidity disclosures to the reporting period (and known contractual obligations) rather than asking not-for-profits to forecast into the future, (iv) clarity on applying the direct method of cash flows, and many more.
Currently the FASB has received approximately 30 responses, which can be accessed here, with many more sure come by the due date. Additionally, the FASB has announced that it plans to hold roundtable discussions on the east coast in September 2015 and on the west coast in October 2015.
To stay current on this topic, follow EisnerAmper’s Not-for-Profit Trends and Tips blog and also sign up for FASB’s electronic Action Alert.