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Not-for-Profit Financial Statements Project Update

Not-for-Profit

By Trevor Warren

The Not-for-Profit Advisory Committee (NAC) has been working on and presented various Financial Statement Presentation (FSP) topics to the Financial Accounting Standards Board (FASB) for their consideration. The NAC recommended the FSP Project to improve upon financial reporting for not-for-profit (NFP) entities.

On May 29, 2013 the FASB met on the NFP FSP project, and were specifically focused on improving net asset classification requirements and improving information provided in financial statements and notes about liquidity, financial performance and cash flows. The FASB tentatively decided to define an intermediate operating measure for NFP financial reporting on the basis of two key dimensions:

- A mission dimension based on whether resources are from or directed at carrying out a NFP’s purpose for existence.

- An availability dimension based on whether resources are available for current period activities, and reflecting both external limitations and internal actions of a NFP’s governing board.

The FASB also considered three alternatives for presenting an intermediate measure in a NFP’s statement of activities. It tentatively decided to support an alternative that would present all legally available mission related revenues before reductions for amounts designated by the governing board for use in future periods, rather than only the net of those amounts. That presentation also would include amounts of previously unavailable resources that the governing board made available for use in the current period.

Board Deliberations on the NFP FSP project are expected to continue through 2013. Ongoing outreach with the FASB, NAC and other interested parties will continue. An exposure draft of the proposed Accounting Standard Update (ASU) is estimated for early 2014. There will be a public comment period immediately following the exposure draft. The FASB will consider the comments and tentatively plan on issuing a final ASU in 2015.

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