March 25, 2021
The FASB Not-for-Profit Advisory Committee (the Committee) held its semiannual meeting on Thursday, March 25, 2021. Because of the COVID-19 pandemic, the meeting was held via video conference. Topics discussed included the following:
Current Financial Reporting Issues—COVID-19-Related Matters—FASB staff pointed to the FASB Staff Educational Paper, Topic 470 (Debt): Borrower’s Accounting for Debt Modifications, published in October 2020. The staff also provided an update on the recently completed Accounting Standards Update No. 2021-03 (Update 2021-03), Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events, which was issued on March 30, 2021. The amendments in Update 2021-03 provide private companies and NFPs with an accounting alternative to perform a goodwill triggering event evaluation, and any resulting test for goodwill impairment, as of the end of the reporting period, whether the reporting period is an interim or annual period. The Committee discussed the accounting and reporting of various federal COVID-19 relief programs that were recently extended through the Coronavirus Response and Relief Supplemental Appropriations Act (December 2020) and the American Rescue Plan Act (March 2021). Those included the Paycheck Protection Program (PPP), the Provider Relief Funds (PRF), and the Higher Education Emergency Relief Fund (HEERF). An American Institute of Certified Public Accountants’ (AICPA) participating observer mentioned additional educational efforts on accounting for PPP loans that are being considered, including possibly being the focus of an AICPA town hall and an article in the Journal of Accountancy. A Committee member provided an update on the PRF, focusing on the Department of Health and Human Services’ (HHS) guidance on “lost revenues” and how practice is applying the guidance in Topic 855, Subsequent Events, concerning the various rounds of HHS guidance in recent months.
FASB Agenda Consultation and NFP Financial Performance Reporting (NFP Financial Statements, Part 2)—The FASB Chair and staff introduced the agenda consultation research project, explaining the project’s background and purpose as well as providing a project timeline. Additionally, FASB staff provided the Committee with an overview of past FASB work on NFP financial performance reporting, which was supplemented by advance meeting materials. In closed breakout groups, Committee members discussed their views with FASB Board members and staff on potential areas for the FASB to prioritize. Those closed breakout group discussions were followed by report-outs when the public meeting resumed.
Committee members indicated that a project on intermediate operating measures might be worth pursuing but noted the potential difficulty in defining and mandating such a measure. Members identified both comparability across NFPs in a specific industry and consistency within a specific organization as being meaningful to financial statement users. Several potential solutions were discussed, including defining items to be excluded from an intermediate operating measure, providing industry-specific measures, and creating a measure that would allow for flexibility and judgment. Another area identified by members was the consolidation of NFPs. Members noted that diversity in practice exists in the accounting for consolidations by NFPs and expressed the need for greater simplification. Accounting for government grants was discussed and, while members indicated that the recent improvements made by the amendments in Accounting Standards Update No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made, were helpful, applying the guidance to the various recent COVID-19 funding (described above) has indicated that some additional improvements may be warranted. Other areas identified by members included the need for additional guidance on the valuation of gifts of certain nonfinancial assets (especially pharmaceuticals), a review of the costs and benefits of requiring certain NFPs (such as health care providers) to report expenses on the basis of functional classification, a consideration of providing guidance around voluntary disclosures in Management’s Discussion and Analysis (MD&A), and enhancing guidance for targeted disclosures.
Implementation of Major/Other Updates—The Committee briefly discussed the upcoming implementation of Topic 326, Financial Instruments—Credit Losses, especially regarding program-related investments made by foundations. In addition, FASB staff noted (1) some Committee member observations on areas of continuing judgment when applying the amendments in Update 2018-08, consistent with the above discussion, and (2) an upcoming educational webcast on June 3, 2021, on Accounting Standards Update No. 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. Finally, FASB staff provided updates on its monitoring of the implementation of Topic 842, Leases, and Topic 848, Reference Rate Reform, including follow-up standard-setting activities by the Board since the September 2020 NAC meeting.
Other Projects in Progress—FASB staff provided an update on the simplifying the balance sheet classification of debt, identifiable intangible assets and subsequent accounting for goodwill, and recognition and measurement of revenue contracts with customers under Topic 805 projects.
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.