March 31, 2022

The FASB Not-for-Profit (NFP) Advisory Committee (the Committee) held its semiannual meeting on Thursday, March 31, 2022. Because of the COVID-19 pandemic, the meeting was held via video conference. Topics discussed included the following:

NFP Reporting of Gifts in Kind (Accounting Standards Update No. 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets)—FASB staff provided an overview of the amendments in Update 2020-07 and referenced several recent FASB webcasts in which certain implementation questions were addressed by FASB staff.

Current Research Agenda—FASB staff provided an update on several projects on the research agenda, including Agenda Consultation, Accounting for Exchange-Traded Digital Assets and Commodities, and Accounting for Financial Instruments with Environmental, Social, and Governance (ESG)-Linked Features and Regulatory Credits.

2021 Invitation to Comment, Agenda Consultation—Committee members provided feedback on various topics in the 2021 Invitation to Comment (ITC), including software, intermediate operating measures for NFPs, recognition and measurement of government grants, and consolidation. Committee members agreed that the development of internal-use software is common in certain parts of the NFP sector (such as health care), and that the use of software as a service (SaaS) is increasingly prevalent in much of the NFP sector (such as higher education), often with a high degree of necessary customization. A Committee member noted that because SaaS is becoming more widely available, new internally developed software may not be as common in the future. Committee members noted that a more standardized intermediate operating measure for NFPs might be helpful, but it likely would be challenging to develop. Committee members showed support for the Accounting for Government Grants, Invitation to Comment research project, noting that there is a lack of guidance for for-profit entities and that different models are available to analogize to. Some members, however, cautioned about potential comparability issues that the presentation options in IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, could cause in the health care industry, where NFP providers currently use the contribution guidance in Subtopic 958-605, Not-for-Profit Entities—Revenue Recognition, for such grants. Committee members spoke about existing challenges in navigating the NFP consolidation guidance.

Accounting for Exchange-Traded Digital Assets and Commodities—Committee members explained the growing importance of digital assets in the NFP sector. Many Committee members indicated that NFPs generally are not holding digital assets as part of their investment strategy. Committee members noted that some NFPs have received donations of digital assets and liquidated them upon receipt, similar to when equity securities are gifted to NFPs. Several Committee members noted that some NFPs are not currently accepting donations of digital assets but are in the process of reviewing gift acceptance policies and establishing relationships with third parties to assist with liquidation. Committee members noted that some smaller NFPs have received donations of digital assets but have not liquidated them as of period end, resulting in valuation and impairment challenges. One Committee member stated that he generally agreed that measuring exchange-traded digital assets at fair value would be beneficial.

Accounting for Financial Instruments with Environmental, Social, and Governance (ESG)-Linked Features—Committee members noted that financial instruments with ESG-linked features is an emerging topic for NFPs and is gaining traction among investors and policymakers. Committee members stated that while NFPs are starting to screen investment portfolios for ESG investments and evaluate ESG investments in relation to their missions, they are not currently seeing issuances of or investments in financial instruments with ESG-linked features in the NFP sector. Rather, a Committee member mentioned that some NFPs are issuing green bonds or social bonds.

Accounting for Regulatory Credits—A Committee member shared a recent project started by his organization that will create regulatory credits with the goal of generating revenues. Another Committee member highlighted that some of her for-profit clients are entering into contracts to sell regulatory credits.

Implementation of Other Standards—FASB staff provided updates on its monitoring of the implementation of Topic 326, Financial Instruments—Credit Losses, and Topic 842, Leases, and summarized follow-up standard-setting activities by the Board since the September 2021 NAC meeting, including the issuance of Accounting Standards Updates No. 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, and No. 2021-09, Leases (Topic 842): Discount Rate for Lessees That Are Not Public Business Entities. Committee members discussed the implementation issues arising from the application of Topic 326 to programmatic loans made by foundations.

Current Financial Reporting Issues—COVID-19-Related Matters—FASB staff provided an update on COVID-19 financial reporting issues raised by Committee members, including accounting for employee retention credits and measurement uncertainty with provider relief funds.



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.