Attestation Update – A&A for CPAs

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FASB splits revision of NPO accounting into two workstreams

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Image courtesy of

Image courtesy of

On October 28, 2015, FASB voted to split in two the exposure draft to overhaul presentation of not-for-profit financial statements. You can see their summary of the decision here, although that appears to be a dynamic link and the discussion will likely move soon. Extract of minutes on this issue on can be found here. That appears to be a link that will be in place a long time.

Reason for breaking this in two is that some components of the exposure draft received serious pushback. Those items will be considered in more detail and addressed at a later, yet-to-be-determined date.

The less contentious items will move forward “in the near term.” One article I read, but for which I don’t know how to provide a link, said FASB hopes to have what they call workstream one finished in mid-2016.

(Cross-post from my other blog, Nonprofit Update.)

The first portion, likely to be finalized next year, includes:

  • Revision to net asset classification, which includes reducing classes from 3 to 2, adding disclosure of board-designated funds, and disclosure of underwater endowments.
  • Expense disclosures, which would require a matrix presentation of expenses by nature and function, net external investment expenses and direct internal expenses against the investment revenue, disclose the amount of investment expenses netted, and increased narrative explanation of cost allocations.
  • Liquidity disclosures – brief discussion does not mention whether there will be any revision to what appeared in the exposure draft requiring new qualitative and quantitative disclosures.
  • Method of presenting operating cash flows – I am a bit confused what this comment means because I had read elsewhere that a requirement to present operating cash flows on the direct method was contentious, which makes me wonder whether there will be some changes made here or it will forward as proposed in the exposure draft.
  • Improved disclosures for entities which present an operating measure – This disclosure-only discussion would be a new element to replace the required intermediate measure of operations.

Workstream two, which will take substantially more time to address, would include:

  • Intermediate measures of operation – this would address whether to even require intermediate measures, whether or not to provide a required definition, if required then what items to include, and alternative presentations suggested in feedback.
  • Realignment of certain items in the statement of cash flows.

I am surprised the liquidity disclosures did not get more pushback.

Delay in the issue of intermediate measures of operations would obviously postpone the entire idea of moving interest expense and interest revenue to a different section of the statement of activity.

As one more observation, seems to me this will obviously require another exposure draft for those elements rolling into workstream one. I expect to see that very soon if the project has any hope of going final in 2016. On the other hand, I don’t know the implications of calling something a “workstream.” Maybe that provides an ability to move forward select items without another exposure draft. Does anyone know what the most likely path would be for moving workstream one forward?

(Hat tip to Bill for calling this to my attention.)

Written by Jim Ulvog

October 30, 2015, 8:55 am at 8:55 am

Posted in Accounting

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