Webcast to cover new not-for-profit standard

The FASB on September 13, 2016, plans to hold a live webcast to explain its new accounting requirements for charities, universities, foundations, and other not-for-profit groups.

The requirements, published on August 18 as Accounting Standards Update (ASU) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, offer the first significant change to not-for-profit reporting in more than 20 years.

The new standard aims to provide more transparency to donors, watchdogs, and regulators about how a not-for-profit organization spends its money and manages its resources.

It requires more information about liquidity, about expenses, and about endowments that have dropped below their initial value or the value set by law or a contract. It also attempts to shine more light on restrictions around an organization’s assets by changing the categorization of their assets into those with donor restrictions and those without, versus current practice’s three categories — unrestricted, temporarily restricted, and permanently restricted.

FASB member Lawrence Smith is scheduled to explain the changes along with FASB Assistant Director Jeff Mechanick and FASB supervising project manager Rick Cole.

The webcast is expected to cover the main points of the newest requirements, how they differ from existing US GAAP, and how organizations should transition to the new requirements. Audience members will be able to ask questions, the FASB said.

The update is the result of feedback from the FASB’s April 2015 proposal, Proposed ASU No. 2015-230, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities.

The FASB received support for many of the elements of the proposal, but fielded much criticism about parts of the plan that would have shifted the not-for-profit accounting model away from requirements for for-profit enterprises.

The FASB agreed to take out some of the more controversial elements, such as drawing up a different statement of cash flows and requiring groups to come up with a uniform performance measure, and address them at a later date. The board has not said when it will take up these issues.

The FASB in 1993 established accounting standards for not-for-profit organizations via SFAS No. 116, Accounting for Contributions Received and Contributions Made (FASB ASC 958), and SFAS No. 117, Financial Statements of Not-for-Profit Organizations.

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