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Proposed ASU on Nonfinancial Contributions: Not-for-Profits Give Your Input
The Financial Accounting Standards Board recently released the first draft of a proposed Accounting Standards Update (ASU) for not-for-profit entities focused on nonfinancial contributions. The board has asked for feedback on eight questions.
By Michael F. Cade, CPA, CGMA
The Financial Accounting Standards Board recently released the first draft of a proposed Accounting Standards Update (ASU) for not-for-profit entities focused on nonfinancial contributions. The FASB wants to improve clarity and ease the understanding of these types of contributions for financial statement users.
Nonfinancial contributions -- often called gifts in kind -- include any noncash contribution, such as services, household items, real estate, and clothing. Under current GAAP these contributions are comingled with financial contributions on the financial statements.
The proposed ASU will change the financial statement presentation and footnote disclosures. First, nonfinancial contributions will need to be broken out from financial contributions and recorded on separate lines of the statement of activities. Second, a new footnote disclosure will be required to show the types of nonfinancial contributions, the valuation methodologies, and their expected use, with specific reference to any donor restrictions.
The FASB is collecting input on the proposal through April 10, 2020. Specifically, the board has asked for feedback on eight questions. A summary of the questions is as follows:
- Is the GAAP amendment operable? Why or why not?
- Should the scope of the amendment cover all nonfinancial contributions, or should some categories of assets be excluded?
- Should disclosure requirements apply to all categories of nonfinancial contributions, or should some categories be excluded?
- Should the new standard be applied retroactively to the financial statement in which the final standard is issued?
- What is the likely time needed to implement, and should early adoption be permitted?
- Is education or implementation guidance for the new standard required?
Most not-for-profit entities receive nonfinancial contributions, so the impact of this amendment is far reaching. CPAs working at nonprofits, serving on the boards of nonprofits, or serving the nonprofit sector need to understand the impacts and start to prepare. Here are a few tips:
- Read the proposed ASU and consider the impact to your organization.
- Discuss the proposal with your financial audit firm to gauge the level of effort needed for implementation.
- Review the full questions included with the ASU and, if necessary, provide feedback to the FASB by the April 10, 2020, deadline.
- Start a discussion with senior management within your organization about the proposed changes to identify any required alterations in policy or practices.
Bottom Line
This new ASU is far-reaching and will impact many not-for-profit entities. As a CPA engaged with nonprofits, you need to understand the amendment, take the opportunity to provide your input via FASB’s feedback process, and start to get your organization ready for implementation.
Michael F. Cade, CPA, CGMA, is a strategy consultant and executive coach for MFCCoach LLC in Morrisville, Pa., and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at mfcade@nfpbeyondthenumbers.com.
You can hear from Cade on this ASU in a CPA Conversations podcast.
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