WHAT IS THE FASB NOT-FOR-PROFIT ENTITY TEAM, AND WHAT DO THEY DO?
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-profit entities (NFPs) about the type of financial information they need and (b) NFPs about the costs required to provide the information that their stakeholders seek. Among other things, we want to learn whether:
- Financial statements are providing useful information that appropriately reflect the economics of the entity’s activities, resources and obligations
- Financial statements include information that is unnecessary, redundant, or confusing
- Proposed changes in accounting and reporting will result in communication from an organization that is more clear, complete, and comparable
- The costs of implementing and complying with a new standard are justified by the increased benefits of the information improvements.
- Donors, including foundations and grantors
- Lenders, significant vendors, lessors, and other creditors
- Regulators, accrediting bodies, and other similar oversight bodies
- Insurance providers
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.
NOT-FOR-PROFIT STANDING RESOURCE GROUP
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 serving on the standing NFP resource group, please contact Jeff Mechanick at email@example.com or 203-956-5301.
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 PROJECTS RELEVANT TO NOT-FOR-PROFIT ENTITIESTo learn more about other projects relevant to NFPs and other entities, please visit the technical agenda page found here. Timing of upcoming meetings can be found here.
Simplification Initiative—This initiative involves the Board adding narrow-scope projects to its agenda that stakeholders have identified as opportunities to simplify GAAP in a relatively short time period. The projects included in the initiative are intended to improve or maintain the usefulness of the information reported to investors while reducing costs and complexity in financial reporting. Stakeholders who have suggestions and potential solutions to simplify existing GAAP for all public companies, private companies, not-for-profit organizations, and employee benefit plans can email their suggestions to firstname.lastname@example.org.
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.