Tentative Board Decisions
Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
July 23, 2014 FASB Board MeetingFinancial Statements of Not-for-Profit Entities. The Board discussed how the decisions it has reached in the project on financial statements of not-for-profit entities (NFPs) relate to its research project on financial performance reporting (FPR). The Board also continued its discussion of presentation alternatives for capital-like transactions and events, including when and how to report expirations of donor-imposed restrictions.
Relationship to the FPR Research Project, Particularly the Cash Flow Statement for NFPs
The Board discussed its prior tentative decision to recategorize certain cash inflows and outflows in a cash flow statement for NFPs and whether to proceed with those decisions in light of the uncertainty that the FPR research project will address the cash flow statement. The Board affirmed its prior decisions for NFPs to include cash (1) receipts of gifts to acquire long-lived assets in operating activities, (2) payments to acquire long-lived assets in operating activities, (3) receipts of interest and dividends in investing activities, and (4) payments of interest in financing activities. The Board also decided that, consistent with its decision for items (1) and (2), cash proceeds from the sale of long-lived assets should be classified as inflows from operating activities rather than as inflows from investing activities.
Capital-Like Transactions and Events
The Board previously decided that all unrestricted gifts are reported within the intermediate measure of operations. The Board concluded that by placing a gift of a long-lived asset in service (rather than selling it), the entity, effectively, is making all or a portion of the asset’s economic benefit unavailable for current operations. Therefore, consistent with the availability dimension underlying the definition of that measure of operations, an NFP would report a transfer out of current operations for the amount of the gifted long-lived asset expected to be utilized in future periods. In subsequent periods, the NFP would report a transfer back into current operations to the extent long-lived assets are utilized during the current reporting period. The Board also decided that although those transfers are reported in ways that are similar to governing board designations, they are sufficiently different and should be presented discretely. The Board also decided to require that an NFP use the placed-in-service approach for the treatment of expiration of restrictions related to long-lived assets, thus eliminating the option to release the donor-imposed restriction over an asset’s estimated useful life.
The Board directed the staff to include a question in the forthcoming Exposure Draft about whether the benefit of reporting all capital-like gifts consistently outweighs the potential reduction in both costs and complexity for users if small or ongoing capital-like gifts were not subject to the requirement to report transfers out of and subsequently back to operations.