NEWS RELEASE 08/06/08
FASB Issues Staff Position FAS 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds
Norwalk, CT, August 6, 2008—The Financial Accounting Standards Board (FASB) today issued FASB Staff Position (FSP) FAS 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds. The guidance is intended to improve the quality and consistency of financial reporting of endowments held by not-for-profit organizations.
"The FSP addresses issues that are very important to the not-for-profit sector, especially organizations with sizeable endowments and the users of their financial statements, such as donors, credit rating agencies, and regulators," states Jeffrey Mechanick, FASB project manager. "The adoption of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA) has raised significant questions about the reporting of donor-restricted endowment funds. Moreover, organizations across the country now find themselves subject to increased public scrutiny on how they manage and use their endowments, which in many instances have seen tremendous growth over the past decade."
This FSP provides guidance on classifying the net assets (equity) associated with donor-restricted endowment funds held by organizations that are subject to an enacted version of UPMIFA, which serves as a model act for states to modernize their laws governing donor-restricted endowment funds. Approximately 20 states have already done so, and many more are expected to do so over the next few years.
This FSP also requires additional disclosures about endowments (both donor-restricted funds and board-designated funds) for all organizations, including those that are not yet subject to an enacted version of UPMIFA.
The provisions of this FSP are effective for fiscal years ending after December 15, 2008. Early application is permitted, as long as the organization has not previously issued annual financial statements for that fiscal year.
FSP 117-1 is available at www.fasb.org.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.