September 16-17, 2019

The FASB Not-for-Profit Advisory Committee (the Committee) held its regular semiannual meeting on September 16 and 17, 2019. Topics discussed included:

Not-for-Profit Reporting of Gifts-in-Kind—Committee members discussed the FASB project on the reporting by not-for-profit entities (NFPs) of gifts-in-kind (GIKs), focusing on scope, presentation, and disclosures.

Committee members generally indicated that additional transparency about GIKs through required presentation and disclosure enhancements could provide users with useful information, although some members noted that many NFPs already voluntarily provide much useful information about GIKs, if material, through those means.

Members generally agreed with the current scope of the project, which is limited to nonfinancial GIKs, although some Committee members questioned whether certain types of GIKs, such as donated volunteer services, should be excluded from the scope, except possibly to align the disclosure requirements for donated services with those proposed for other nonfinancial GIKs.

Committee members discussed possible alternatives for presentation requirements, including disaggregation of GIKs as separate line items or subtotals on the face of the financial statements. Members generally indicated that a requirement for separate line item presentation of GIKs revenue, apart from cash contributions, on the face of the financial statements, with additional note disclosures, may provide users with the most useful information and should not result in a significant cost for preparers.  While Committee members indicated that they had seen some NFPs likewise break out GIKs-funded expenses, some members questioned the incremental information content of separate presentation of GIKs expenses, especially if separate presentation of GIKs revenue was combined with disclosure of GIKs in inventory. Members also were concerned that in some instances (for example, the same type of nonfinancial asset being both donated to and purchased by the NFP) tracking and isolating GIKs expenditures could be difficult, particularly for smaller NFPs, which are often relatively more reliant on GIKs than larger NFPs.

Committee members discussed potential quantitative and qualitative disclosure requirements for GIKs of nonfinancial assets. Members generally supported: (1) quantitative disclosures disaggregating GIKs revenue by type of GIK (such as food, pharmaceuticals, or clothing), (2) enhanced information about key inputs and assumptions in the valuation of GIKs by type of GIK (at the level of disaggregation), and (3) qualitative information about donor restrictions affecting the use of GIKs in an NFP’s programs or other activities. As with presentation, and for many of the same reasons, Committee members expressed concern about cost and complexity, especially for smaller NFPs, in requiring disaggregated disclosures about GIKs-funded expenses or disclosure of GIKs in ending inventory.  Members also generally questioned the usefulness of disclosing organizational policies in accepting GIKs because they are concerned that the resulting information could end up as boilerplate.

Some Committee members indicated that additional educational materials or implementation guidance by the Board about valuation of GIKs could be helpful, while others questioned if such efforts would add significant value beyond what the AICPA and industry groups have done and were continuing to do.

Effective Date considerations for not-for-profit entities, including specific issues regarding conduit debt obligors, NFP implementation, and interim financial reporting: FASB staff provided an update on the Credit Losses, Hedging, and Leases—Effective Dates for Private Companies, Not-for-Profit Organizations and Small Public Companies project, including the Exposure Draft and next steps. Committee members agreed with the change in philosophy in setting effective dates of major projects, although some were disappointed that the Board was not proposing to defer the effective date of the Leases standard for NFP conduit debt obligors.  Members were generally supportive of an additional one-year deferral of the effective date for interim reports.

Implementation Issues related to: Accounting Standards Updates No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, and No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, Topic 606, Revenue from Contracts with Customers, Topic 842, Leases, and Topic 326, Credit Losses.

Other Projects in Progress—FASB staff provided updates on ongoing projects, including Reference Rate Reform: Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting, Identifiable Intangible Assets and Subsequent Accounting for Goodwill, Improving the Accounting for Asset Acquisitions and Business Combinations, and Simplifying the Balance Sheet Classification of Debt. A participating observer also provided updates on the AICPA’s projects on management’s discussion and analysis and digital assets.  The Committee discussed the need to raise awareness about impending reference rate reform and potential methods for educating NFPs. Committee members noted that the option to amortize goodwill was a welcome change and they anticipate broad adoption. All the financial statement users present indicated that they generally disregard goodwill in their analyses. Committee members working with health care NFPs obligated for variable rate demand bonds indicated disagreement with the Board’s decision (currently being reexposed for public comment) not to consider contractually linked letters of credit in classifying the debt as current or noncurrent. Such entities are required to present a classified balance sheet and expressed concern that the proposed presentation does not reflect the economics of the arrangement and will be confusing to the users of their financial statements.

Other—Other topics discussed included:

• International NFP activities
• Recent trends, concerns, and observations in the NFP sector.