Not-for-Profit Advisory Committee (NAC)


March 23, 2023

The FASB Not-for-Profit (NFP) Advisory Committee (the Committee) held its semiannual meeting, virtually, on Thursday, March 23, 2023. Topics discussed included the following:

Implementation of Recent Standards—FASB staff provided an update on the implementation of recent standards since the September 2022 NAC meeting. Committee members provided feedback on the following topics:

  1. Accounting Standards Update No. 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets
  2. Topic 848, Reference Rate Reform
  3. Topic 326, Financial Instruments—Credit Losses
  4. Topic 842, Leases.
Committee members noted that, currently, there are no significant implementation concerns or issues in applying the guidance in Update 2020-07 or Topic 848. An American Institute of Certified Public Accountants (AICPA) observer indicated that the AICPA is in the process of updating its Not-for-Profit Entities Audit and Accounting Guide for the application of the credit losses guidance in Topic 326 to programmatic loans. One Committee member stated that Topic 842 has improved transparency and reduced the need for resource providers to make assumptions about the balance sheet effects of leases when analyzing an entity.

Update on Other Current Projects—FASB staff provided updates on the Leases (Topic 842): Common Control Arrangements, the Accounting for and Disclosure of Crypto Assets, and the Accounting for and Disclosure of Software Costs projects and briefly introduced the Improvements to Income Tax Disclosures project and the Accounting for Government Grants research project. Committee members did not raise any concerns about the Leases (Topic 842): Common Control Arrangements project. Some Committee members indicated that they do not typically see NFPs accepting or holding crypto assets, while other Committee members noted that NFPs that do accept crypto assets are sometimes required by donors to hold those assets for a specified period (to limit the market impact of liquidating the asset). One Committee member stated that recent events have caused NFPs to be more hesitant to receive gifts of and/or hold crypto assets, for both public relations and risk management purposes. Committee members generally indicated a preference for a single model for accounting for software costs, rather than the dual model alternative being explored, and expressed support for the probable threshold for the single model.

Recent Trends, Concerns, and Observations of Committee Members—Committee members discussed recent trends, concerns, and observations in the NFP sector, including an increase in underwater endowments because of financial market declines during 2022 and the desire by some stakeholders for greater comparability in operating measures reported by NFPs. One Committee member expressed concern about the distinction made between public NFPs (obligors for publicly traded conduit debt) and other NFPs in certain major accounting standards, and Committee members discussed whether the information needs for public debt holders differ from the information needs of private debt holders. Committee members commented that the increasing interest rate environment has amplified the impact of determining appropriate discount rates in accounting for multi-year promises to give.

FASB Not-for-Profit Advisory Committee Meeting Recaps are provided for those interested in following the activities of the Not-for-Profit Advisory Committee. More details on the Not-for-Profit Advisory Committee’s input on the FASB’s projects can be found within the meeting minutes, which will be published on the FASB website in the coming weeks.