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FASB’s Anticipated Exposure Draft on Changing the Not-For-Profit Financial Statement Model

Apr 16, 2015

On March 31, 2015, partners Candice Meth and Julie Floch presented a not-for-profit webinar titled “Understanding the Principles of the FASB’s Anticipated Exposure Draft on Changing the Not-For-Profit Financial Statement Model.”  The objective of the FASB’s exposure draft is to re-examine existing standards for financial statement presentation by not-for-profit entities, focusing on improving net asset classification requirements and information provided in financial statements and notes about liquidity, financial performance, and cash flows.  Below is a summary of the changes that are expected to be in the anticipated exposure draft.

The proposed changes to net assets classification would replace the current three classes of net assets with two classes of net assets: those with and without donor-imposed restrictions.  The proposed changes would also require disclosures for both with and without donor restrictions as to the nature and amount of board designations and donor restrictions.  For example, operating activities would include purchases, sales, and contributions restricted for property, plant, and equipment; investing activities would include cash received from interest and dividends; and financing activities would include interest paid on long-term debt.

Current GAAP Proposed GAAP

Three categories of net assets:  

Two categories of net assets:  

  • Unrestricted 
  • Without donor restrictions 
  • Temporarily restricted 
  • With donor restrictions 
  • Permanently restricted 

The proposed changes to the cash flow would require the presentation of the cash flow under the direct method, whereas currently the cash flow can be prepared and presented either under the direct or indirect method.  In addition, there could be re-categorizing of components of the cash flow statement to better align operating information with the statement of activities.

Current GAAP Proposed GAAP
  • Direct or indirect method acceptable 
  • Requires direct method for operating cash flows 
  •  Re-categorizes certain items on the cash flow statement 

The FASB’s exposure draft is expected by mid-April with a comment period ending on July 31, 2015; issuance of the final standard is still to be determined.

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 .


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Brian C. Collins

Brian Collins is an Audit Senior Manager with over 15 years of public accounting experience. He performs outsourced accounting services, audit, review, compilation, and tax services for a wide range of clients in various industries, including not-for-profits.

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