FASB To Propose New Not-for-Profit Reporting Requirements

Thursday, March 05, 2015

By Ken Tysiac
Journal of Accountancy

A Proposal FASB expects to issue for public comment in mid-April is aimed at enhancing the usefulness of the financial statements of not-for-profit organizations.

FASB voted 5-2 Wednesday to issue a proposed Accounting Standards Update, which would oppose changes to:

The current net asset classification scheme.
The required information about an organization’s liquidity, financial performance, and
cash flows.

The board will propose reducing the number of new asset classes presented from three to two. The new classification would convey net assets with donor-imposed restrictions and without donor-imposed restrictions.
Under the proposal, all not-for-profits also would be required to report expenses both by their nature and by function.

“I think the benefits justify the costs,” FASB member Tom Linsmeier said during the meeting. “I think that we’re providing an opportunity for the not-for-profit community to tell their story far better.”

FASB Chairman Russell Golden, who cast one of the dissenting votes, said some aspects of the proposal will reduce costs, promote simplification, and provide additional benefits to the not-for-profit community. But he is concerned that the project may increase complexity in the system overall because some of the tentative decisions address conditions only for not-for- profits on issues that also apply outside the not-for-profit sector.

“We should have thought holistically about the cash flow statement, holistically about the operating performance measure, and holistically about the classifications within the cash flow statement,” Golden said.