On March 10 and 11, 2014, FASB’s Not-for-Profit Advisory Committee (NAC) met to continue their discussion on financial reporting issues for not-for-profit entities. The bulk of the discussion surrounded revisiting decisions reached during prior meetings, including the required presentation of an intermediate operating measurement. While all members were in favor of including this important metric, some expressed concerns over the inclusion of restricted gifts for capital purchases, as it may distort the financial condition of an entity.
Suggested Improvements to Financial Reporting for Nonprofits
The NAC members also split into breakout groups to discuss NFP-specific disclosures and made some interesting suggestions, as follows:
- Eliminate or combine fair value levels
- Consolidate the investment, endowment and fair value disclosures
- Enhance liquidity disclosures
- Include a roll-forward of property, plant and equipment
- Include more specific information about the tax-exempt status
- Include cost allocation basis and rationale
While these discussions are still in their infancy, it does shed some light on some potential changes coming down the road.
Additionally, it was noted that FASB removed the management discussion & analysis (MD&A) project from the NAC’s research agenda and is looking to delegate this project to an outside committee. While this decision does not eliminate the potential for an MD&A to be required in the future, it does delay the implementation.
Stay tuned for more insight on NAC discussions and potential changes to financial reporting for NFPs.