Not-for-Profit Financial Reporting: Financial StatementsLast updated on January 9, 2014. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
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.
Decisions Reached at Last Meeting (December 18, 2013)
The Board continued deliberations and tentatively decided to improve the reporting of expenses for all not-for-profit entities (NFPs) by:
- Requiring NFPs to report expenses by their nature and retaining the requirement to report expenses by function
- Continuing to allow NFPs the flexibility to present expenses by either function or nature, or by both on the face of the statement of activities or within the notes
- Requiring NFPs to provide an analysis of all expenses by function and by nature in one location, in the statement of activities, a separate statement of expenses (currently called a statement of functional expenses), or a schedule in the notes. That analysis would include all expenses, both operating and non-operating, and would neither require nor preclude functionalization of non-operating expenses. Although this analysis would typically be provided in the form of a matrix, that specific format would not be required.
Summary of Decisions Reached to Date (December 18, 2013)
Decisions reached on May 29, 2013
The Board tentatively decided to define an intermediate operating measure 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.
Before conducting further outreach, the Board directed the staff to explore whether the availability dimension should be limited to resources that are liquid.
The Board 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.
The Board also discussed certain implementation matters but concluded that they would be better addressed later in the project. The Board will consider at a future meeting whether the presentation of an intermediate operating measure would be required, permitted, or encouraged.
Decisions reached on September 4, 2013
- Replace the existing requirements of paragraphs 958-210-45-1 and 958-225-45-1 to present totals for each of three classes of net assets on the face of a statement of financial position and for changes in each of those classes on the face of a statement of activities with similar requirements for each of two classes of net assets that convey net assets with donor-imposed restrictions and without donor-imposed restrictions. The Board also decided to make conforming changes to the terminology and definitions of the net asset classes.
- Retain the current requirement to provide information about the nature and amounts of different types of donor-imposed restrictions but modify the requirement to (a) remove the hard-line distinction between temporary restrictions and permanent restrictions and (b) focus instead on describing differences in the nature with a focus on both how and when the resources (net assets) can be used.
- Require disclosure of information about the amount and purposes of board designations of net assets without donor-imposed restrictions.
Decisions reached on October 23, 2013
The Board continued deliberations on the project and tentatively decided to improve the statement of cash flows by requiring the direct method of reporting cash flows provided [used] by operating activities and removing the requirement to reconcile the change in net assets to net cash flows from operating activities (often referred to as the indirect method).
The Board also discussed revising the cash flow categories to better align them with the tentative decision for an intermediate measure of operations. The Board agreed such revisions are desirable and decided that they would include:
- Cash gifts with donor-imposed restrictions that they be used to purchase, construct or otherwise acquire long-lived assets for operating purposes would be classified as inflows from operating activities rather than as inflows from financing activities
- Cash payments to purchase, construct, or otherwise acquire long-lived assets for operating purposes would be classified as outflows from operating activities rather than as outflows from investing activities
- Cash dividends and interest income would be classified as inflows from investing activities rather than as inflows from operating activities
- Cash payments of interest expense would be classified as outflows from financing activities rather than as outflows from operating activities.
See “Decisions Reached at Last Meeting” above.
The staff is currently focusing on two areas for the Board’s consideration:
- Continuing its research on ways to improve information about liquidity
- Developing alternative financial statement formats, particularly for reporting operating revenues, expenses and other changes in net assets
For the project timeline, refer to the technical plan.
Board/Other Public Meeting Dates
The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
|December 18, 2013||Board Meeting—The Statement of Functional Expenses|
|December 11, 2013||Education Session—The Statement of Functional Expenses|
|October 23, 2013||Board Meeting—The Statement of Cash Flows|
|October 2, 2013||Education Session—Liquidity and The Statement of Cash Flows|
|September 4, 2013||Board Meeting—Net Asset Classes: Classification and Disclosure Requirements|
|May 29, 2013||Education Session—Net Asset Classes: Background, Stakeholder Concerns, Plans for Revisiting the Net Asset Classes|
|May 29, 2013||Board Meeting—Operating Measure: Definition and Presentation|
|May 15, 2013||Education Session—Operating Measure: Definition (cont.)|
|March 28, 2013||Education Session—Operating Measure: Definition (cont.)|
|January 31, 2013||Education Session—Operating Measure: Background, Objectives, Definition|
|June 6, 2012||Board Meeting—Project Plan|
|May 16, 2012||Education Session—Handout|
|November 9, 2011||Board Meeting—Agenda Announcement|
On November 9, 2011, the FASB chairman announced (press release) the addition of two agenda projects—this standards-setting project and a research project (Not-for-Profit Financial Reporting: Other Financial Communications)—intended to improve financial reporting of not-for-profit entities. The objectives of these projects encompass suggestions received by the Board from its Not-for-Profit Advisory Committee (NAC) at the Committee’s September 2011 meeting. The staff discussed the plans and approach for both projects with the NAC at its March 2012 and September 2012 meetings. Furthermore, the staff has subsequent discussions with members of the project resource group as well as members of NAC. The NAC page contains handouts and minutes from the NAC meetings.
*Contact InformationRonald J. Bossio
Senior Project Manager
Postgraduate Technical Assistant
Postgraduate Technical Assistant