WHAT IS THE FASB NONPUBLIC ENTITY TEAM, AND WHAT DO THEY DO?
The FASB has a long-standing commitment to the not-for-profit sector as part of the FASB’s standard-setting process for U.S. generally accepted accounting principles (GAAP). Over the years, the FASB has addressed the accounting and reporting needs of the sector, both for transactions that are unique to the sector (e.g., contributions received) and for transactions that it has in common with public and private business enterprises (e.g., employee postretirement benefit obligations). A few years ago, the FASB added a staff member dedicated to advising the Board and other staff on issues pertinent to the not-for-profit sector and communicating with members of the sector. To reinforce and broaden such consultation and communication, in October 2009 the FASB approved the creation of a Not-for-Profit Advisory Committee.
The objective of the FASB’s nonpublic entity team is to ensure that the FASB receives timely input from private company and not-for-profit stakeholders throughout all stages of the standard-setting process. The FASB established the team to help identify and analyze issues specific to nonpublic entities and to provide detailed insights related to these issues early in its standard-setting process.
Continue on to learn about FASB’s not-for-profit issues, recent decisions, relevant meetings and other outreach activities.
WHY DOES THE FASB WANT TO HEAR FROM NOT-FOR-PROFIT STAKEHOLDERS?In order to improve U.S. GAAP and to consider the costs and benefits of proposed improvements, the FASB and its staff need to hear directly from (a) stakeholders of not-for-profits about the type of financial information they need and (b) not-for-profits about the costs required to provide the information that their stakeholders seek.
The FASB would like to hear from all stakeholders interested in the financial reports of not-for-profits, including the preparers, practitioners, and users of those financial reports. Among those stakeholders is a broad range of users that include:
- Donors, including foundations and grantors to not-for-profit organizations
- Lenders, significant vendors, lessors, and other creditors
- Regulators, accrediting bodies, and other similar oversight bodies
- Insurance providers
The FASB’s outreach efforts are designed to help not-for-profit organizations and their stakeholders provide the FASB with the input it desires.
NOT-FOR-PROFIT ADVISORY COMMITTEE (NAC)
The Not-for-Profit Advisory Committee (NAC) was established in October 2009. The NAC is a standing committee that is expected to work closely with the FASB in an advisory capacity to ensure that perspectives from the not-for-profit (NFP) sector are effectively communicated to the FASB on a timely basis in connection with the development of financial accounting and reporting standards. The principal responsibilities of the Committee are to:
- Provide focused input and feedback relating to (a) the need for and relative priority of proposed projects, (b) conceptual and practical implications of proposals under development in active projects, (c) practice issues, including implementation issues arising from new standards and potential areas for improvement pertinent to the NFP sector, and (d) longer-term issues important to the NFP sector.
- Assist the FASB and its staff with communication and outreach activities to the NFP sector on recent standards and other existing guidance, current and proposed projects, and longer-term issues. NAC members are encouraged to communicate with the NFP sector, both to educate the sector about the roles of the FASB and the NAC and to encourage the sector to communicate with the FASB on financial reporting matters.
- Advise on other matters for which the FASB may seek guidance.
The FASB also has a standing Not-for-Profit Resource Group. Although the Board and staff may call on resource group members, its members primarily serve as a resource to the NAC. From time to time all members or particular types of members (for example, only preparers or only creditors, donors and grantors) are surveyed on matters of interest to the NAC. The time requirements generally are light but we do expect and have received a reasonably high rate of participation from these resource group members. If you are interested in helping in this way, please contact Alicia Posta at email@example.com or 203-956-5207. Additionally, the FASB also has project resource groups advising on current projects such as the Not-for-Profit Financial Reporting: Financial Statements project.
Financial Statements of Not-for-Profit Entities
The objective of this project is to reexamine existing standards for financial statement presentation by not-for-profit entities, focusing on improving:
- Net asset classification requirements
- Information provided in financial statements and notes about liquidity, financial performance, and cash flows.
OTHER RECENT MATTERS OF INTERESTFollowing are recent matters of other projects that are of particular interest to not-for-profit Entities.
Not-for-Profit: Other Financial Communications—The objective of this project was to study communications other than financial statements that not-for-profit entities use to tell their financial story. On January 29, 2014, the Board voted to remove the project from the agenda. Individual Board members based their decisions on different factors including the (1) availability of resources, (2) need to prioritize efforts on most immediate standard-setting needs of stakeholders, (3) likelihood that any recommendations resulting from the project could be voluntary rather than mandatory reporting standards, and (4) concern that the project is dealing with an issue that is beyond the scope of traditional Board activities for reporting information within the bounds of basic financial statements. More information on this removed project can be found here.
Definition of a Nonpublic Entity—The objective of this project was to re-examine the definition of a nonpublic entity. On August 7, 2013, the Board issued an Exposure Draft to seek comments on proposed definition of a public company, including implications for private companies and not-for-profit entities. On December 23, 2013, the FASB completed this project with the issuance of Accounting Standards Update No. 2013-12, Definition of a Public Business Entity—An Addition to the Master Glossary. More information on this project can be found here.
Disclosure Framework—On August 7, 2013, the Board discussed whether the decision process as described in the Invitation to Comment, Disclosure Framework, appropriately addresses the needs of providers of resources to not-for-profit entities (especially donors) and, if not, what would be added or amended. The Board tentatively decided that the decision process is sufficient to address the needs of donors if the wording is modified to refer specifically to donors, and pursuit of the entity’s mission or services. More information on this project can be found here.