Accounting Update Auditing and AICPA Expert Panel: What's New, Now and Next

Transcription

1 Accounting Update Auditing and AICPA Expert Panel: What's New, Now and Next May 30, 2012 We will be starting shortly If you experience any technical difficulties, please contact or

2 Awarding CPE for this session In general Respond to all polling questions The rule Respond to at least 75% of the polling questions to pass with full credit Group participation will not receive CPE You have to be logged in individually to receive credit If you experience any technical difficulties, please contact or 1

3 Addressing your questions through Q&A Step 1 Step 2 If you experience any technical difficulties, please contact or support@learnlive.com 2

4 Other helpful features you can use Be sure to shut down all other applications to allow more Internet bandwidth. If you experience any technical difficulties, please contact or 3

5 Welcome Norm Clark Partner Not-for-Profit and Higher Education Practice Claire Esten Senior Manager Not-for-Profit and Higher Education Practice 4

6 Agenda Accounting and auditing update: o Updates to audit reporting o Technical pronouncements effective this year o Recent activity within the standard-setting bodies related specifically to NFP's o Technical updates on the horizon AICPA Not-for-Profit Expert Panel Update: o Expert Panel - Roles and Responsibilities o Audit Risk Alert o TPA's relevant to NFP's o Fair value white paper o Current projects and issues o FASB Activities -NFP Advisory Committee ("NAC") 5

7 Agenda Accounting and auditing update: o Updates to audit reporting o Technical pronouncements effective this year o Recent activity within the standard-setting bodies related specifically to NFP's o Technical updates on the horizon 6

8 SAS 118: Other information in documents containing audited financial statements In the absence of any separate requirement, the auditor s opinion on the financial statements does not cover other information, and the auditor has no responsibility for determining whether such information is properly stated. This SAS establishes the requirement for the auditor to read the other information of which the auditor is aware because the credibility of the audited financial statements may be undermined by material inconsistencies between the audited financial statements and other information. 7

9 SAS 119: Supplementary information in relation to the financial statements as a whole Addresses the auditor s responsibility when engaged to report on whether supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole. Supplementary information = information presented outside the basic financial statements, excluding required supplementary information, that is not considered necessary for the financial statements to be fairly presented. 8

10 SAS 119: Supplementary information in relation to the financial statements as a whole In order to opine on whether Supplementary Information (SI) is fairly stated in relation to the financial statements as a whole, the auditor needs to determine that all of the following conditions are met: the SI was derived from, and relates directly to, the underlying accounting and other records used to prepare the financial statements. the SI relates to the same period as the financial statements. the financial statements were audited, and the auditor served as the principal auditor on that engagement. 9

11 SAS 120: Required supplementary information This standard defines required supplementary information and designated accounting standard setter. establishes the auditor s objectives when a designated accounting standard setter requires information to accompany an entity s basic financial statements. establishes presumptively mandatory performance requirements for required supplementary information. establishes presumptively mandatory reporting requirements for required supplementary information. 10

12 SAS 118/119/120 Effective for audits of financial statements for periods beginning on or after December 15, 2010 Early adoption permitted 11

13 Accounting update Clarifications on Fair Value Measurement and additional disclosures (ASU , ASU ) Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU ) Testing Goodwill for Impairment (ASU ) Updates of most relevance to not-for-profit organizations 12

14 ASU : Improving disclosures about Fair Value Measurements Disclosure requirements Amounts of, and reasons for, significant transfers between Level 1 and Level 2, as well as those into and out of Level 3, of the fair value hierarchy; all presented on a gross basis Policy for when to recognize transfers into and out of the levels Gross information about purchases, sales, issuances, and settlements in the reconciliation disclosure of Level 3 measurements For Level 2 and Level 3 measurements, information about inputs and valuation techniques. Presentation by class of assets and liabilities 13

15 ASU : Improving disclosures about Fair Value Measurements "Before" and "After 14

16 ASU : Improving disclosures about Fair Value Measurements Effective date and transition Periods beginning after December 15, 2009, except for the disaggregation requirement for the reconciliation of Level 3 measurements, which is effective for periods beginning after December 15,

17 ASU : Fair value measurements Changes made to converge with IFRS and clarify FASB's intent, but do not require additional fair value measurements Highest-and-best-use and valuation premise concepts apply only to nonfinancial assets Option to measure certain groups of financial assets and liabilities on a net basis Guidance provided on incorporating certain premiums and discounts in fair value measurements 16

18 ASU : Fair value measurements New disclosures, some not required for nonpublic entities, including, but not limited to: Information about valuation techniques and unobservable inputs used in Level 3 measurements Narrative description about Level 3 measurements' sensitivity to changes in unobservable inputs Effective for nonpublic entities for annual periods beginning after December 15,

19 ASU : Disclosures about the credit quality of financing receivables and the allowance for credit losses Enhances the disclosures required for: Financing receivables (for example, loans, trade accounts receivable, notes receivable, and receivables relating to a lessor s leveraged, direct financing, and sales-type leases) and Allowances for credit losses under ASC 310, Receivables. 18

20 ASU : Disclosures about the credit quality of financing receivables and the allowance for credit losses Requires disclosure of the following: Information about the credit quality of financing receivables Aging of past due receivables The nature and extent of troubled debt restructurings and their effect on the allowance for credit losses Significant purchases and sales of financing receivables 19

21 ASU : Disclosures about the credit quality of financing receivables and the allowance for credit losses Relate to receivables that are due in more than one year, including program-related investments, notes receivable, capital lease receivables, student loans receivable and other loans receivable (collectively referred to as "financing receivables"). Contributions receivable are not included, even though they may be due in more than one year. Many of the disclosures currently required by GAAP must now be provided by class of financing receivable. A class of financing receivable is a subset of receivables that is determined by: How the receivable was originally recorded (what was the initial recognition attribute) The receivable s risk characteristics, and The NFP's method for monitoring and assessing risk. May need to consider disaggregation by portfolio segments. 20

22 ASU : Disclosures about the credit quality of financing receivables and the allowance for credit losses Public entities must begin applying most of the new disclosure requirements for periods ending on or after December 15, 2010 Nonpublic entities are not required to comply until periods ending on or after December 15,

23 ASU : Testing goodwill for impairment Gives public and nonpublic entities the option to qualitatively determine whether they can bypass the two-step goodwill impairment test under ASC The amended guidance is effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011, although early adoption is permitted. 22

24 ASU : Testing goodwill for impairment Examples of qualitative factors: Macroeconomic conditions deterioration in general economic conditions, limitations on accessing capital, other developments in equity and credit markets Industry and market considerations deterioration in environment in which entity operates, an increased competitive environment, a change in the market for an entity s products or services, regulatory or political development Cost factors increases in raw materials, labor or other costs that have a negative effect on earnings and cash flows Overall financial performance negative or declining cash flows or decline in actual or planned revenue or earnings compared with actual and project results of relevant prior periods 23

25 ASU : Testing goodwill for impairment Examples of qualitative factors (continued): Other relevant entity-specific events changes in management, key personnel, strategy or customers; contemplation of bankruptcy or litigation Events affecting a reporting unit change in composition or carrying amount of its net assets, a more-likely-than-not expectation of selling or disposing all or a portion of a reporting unit, the testing for recoverability of a significant asset group within a reporting unit, or recognition of a goodwill reporting impairment loss in the financial statements of a subsidiary that is a component of a reporting unit If applicable, a sustained decrease in share price 24

26 ASU : Testing goodwill for impairment If an entity chooses to perform a qualitative assessment and determines that it is more likely than not (> 50% likelihood) that the fair value of a reporting unit is less than its carrying amount, it would then perform Step 1 of the annual goodwill impairment test in ASC and, if necessary, proceed to Step 2. Otherwise, no further evaluation would be necessary. The decision to perform a qualitative assessment is made at the reporting unit level, and an entity with multiple reporting units may utilize a mix of qualitative assessments and quantitative tests among its reporting units. 25

27 Impairment of Indefinite-Lived Intangibles In connection with the project on impairment of goodwill, the FASB received feedback that the same issue exists for impairment analyses for indefinite-lived intangibles A project was added in September 2011 Some decisions to date o Option of qualitatively assessing whether events or circumstances exist that indicate it is more likely than not that an asset is impaired o If no, quantitative test is not necessary, whereas if yes, then quantitative test is necessary Comment period ended in April and a final version of the guidance is expected shortly 26

28 On the Horizon FASB Update Not-for-Profit Advisory Committee (NAC) Lease Accounting Revenue Recognition Loss Contingency Disclosure Changes in the A-133 guidance Classification of Gifts of Securities in the Statement of Cash Flows 27

29 Blue-Ribbon Panel on Standard Setting for Private Companies Sponsored by the Financial Accounting Foundation ("FAF" - FASB's parent), AICPA and NASBA Mission: To address how accounting standards can best meet the needs of users of U.S. private company financial statements in a cost-effective manner Recommendations Single GAAP, better exceptions/modifications, underlying framework Separate standard setter Shorter-term recommendations 28

30 FASB Update The Blue Ribbon Panel recommended establishing an independent private company standards board under FAF. On May 23, 2012, the FAF established the Private Company Council with two principal responsibilities: o recommend changes to existing GAAP to be endorsed by FASB and submitted for public comment before adoption, and o advise FASB on appropriate modifications/exceptions for private companies for new GAAP on FASB's agenda. 29

31 FASB Update The FASB staff is also revisiting the multiple definitions of "private entity"/"nonpublic entity" in the codification. The American Institute of Certified Public Accountants (AICPA) remains skeptical about the long-term commitment of the FASB to the needs of private companies. In a statement on its website, the AICPA states, "The FAF's proposal on private company financial reporting (issued October 4) falls substantially short of what is necessary to make GAAP relevant for private companies by not including establishment of a separate authoritative board." 30

32 FASB/IASB Joint Projects Overview FASB and IASB goal improved, high-quality, converged accounting standards Memorandum of Understanding timing revised in 2010 to address resource constraints, challenges in improving/converging certain areas and stakeholder concerns Boards issued documents seeking input on effective dates and transition methods for several standards related to joint projects Boards recently revised their work plans to focus on financial instruments, revenue recognition, leases and insurance contracts o Jointly extended their timetables by several months but these projects will remain a priority o Certain lower priority projects have been further delayed 31

33 2012 Not-for-Profit Accounting Developments: What s ahead? Projects in process o Lease accounting o Revenue recognition o Fair value measurements o Not-for-profit Financial Reporting: Financial Statements 32

34 FASB Exposure Draft: Lease Accounting 33

35 Lease Accounting Exposure Draft: The Highlights Major proposed changes No "operating leases" Lessee obligations recognized on statement of financial position, with a corresponding "right-of-use" asset, for substantially all leases Interest expense on debt using the interest method, rather than straight-line lease expense (Front-loads expenses related to leases) Amortization of right-to-use asset (generally on a straight-line basis) Lessor records receivable and either removes the leased asset (derecognition) or records deferred revenue (performance obligation), depending on facts No proposed effective date Comment period ended December 15, 2010 New model would apply to all leases within the scope of proposed guidance - no grandfathering 34

36 Leases: Feedback on exposure draft Basic lessee accounting principle widely accepted (i.e. leases create assets and liabilities) Concerns over complexity and costs (for example, reassessment) Estimation and judgment (variable payments and renewal options) Definition of a lease Profit and loss pattern Lessor accounting 35

37 Leases: Reducing Complexity, Cost 36

38 Effect on NFP organizations Potential significant effect on the statement of financial position, which could affect ratios used in debt covenants: o Total assets and total liabilities increased by a similar amount Effect on the statement of activities: o Expense for lease payments replaced by amortization of the rightto-use asset and front-loaded interest expense o Change in net assets would remain approximately the same 37

39 Leases: Remaining steps Related party leases Issues regarding certain lessors Consequential amendments Effective date Re-exposure 38

40 Leases: Timeline 39

41 Revenue recognition Exposure draft highlights The proposed standards would affect any entity that either enters into a contract to sell goods or services that are an output of an entity s ordinary activities or enters into a contract to sell nonfinancial assets (for example, real estate and equipment). What revenues do you have that would fall under this definition and within the scope of the proposed guidance? 40

42 Revenue recognition Revised draft 41

43 Steps to Recognize Revenue Objectives STEP 1 IDENTIFY THE CONTRACT: To identify the bundle of contractual rights and obligations to which an entity would apply the revenue model STEP 2 IDENTIFY SEPARATE PERFORMANCE OBLIGATION(S): To identify the promised goods or services that are distinct and hence, that should be accounted for separately STEP 3 DETERMINE TRANSACTION PRICE: Updated objective- To determine amount of consideration that an entity expects to be entitled in exchange for promised goods or services STEP 4 ALLOCATE THE TRANSACTION PRICE: To allocate to each separate performance obligation the amount to which the entity expects to be entitled. STEP 5 RECOGNIZE REVENUE: To recognize revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service 42

44 Revenue Recognition Project Potential NFP Implications of this project The proposed guidance leaves open some questions about how notfor-profit organizations would apply the principles to their unique revenues: Grants and contracts (contribution vs. exchange) Contracts that provide on-going services vs. product delivery (NFP cost reimbursements) Tuition revenue NFP contracts for projects that are not profitable Reconsidering the completed contract approach Considering practical expedient use 43

45 Revenue Recognition: Timeline 44

46 Loss Contingency Disclosure Issued exposure drafts in June 2008 and July 2010 Both received significant criticism Concerns about cost of compliance, perception that attorney-client privilege would need to be waived to comply with proposal, and that disclosures would provide prejudicial information to litigation adversaries that would hinder an entity's defense Project has been on hold pending SEC observations about compliance with existing disclosure requirements 45

47 Fair Value Measurement Disclosures FASB added to their agenda in November 2011 Scope o "Nonpublic entities" Objective o Assessment of Level 3 disclosures o Exemptions/modifications Targeted outreach to investors, lenders, donors, others 46

48 Not-for-profit Financial Reporting: Financial Statements FASB added to their agenda in November 2011 Scope o Not-for-profit entities Objective o Re-examine existing standards for financial statement presentation, focusing on improving: Net asset classification requirements Information provided in financial statements and notes about liquidity, financial performance, and cash flows 47

49 OMB A-133 changes coming soon The U. S. Office of Management and Budget (OMB) has just issued for comment, an Advance Notice of Proposed Guidance titled, Reform of Federal Policies Relating to Grants and Cooperative Agreements; Cost Principles and Administrative Requirements (including Single Audit Act) (Advance Notice). This represents one of the largest potential changes to the Single Audit and grant administration in many years. Meaningful changes to Single Audits and grant administration are likely. 48

50 OMB A-133 changes coming soon Single Audit Threshold for Audit Increased. Entities that expend less than $1,000,000 in federal awards would not be required to undergo a single audit. A New Category of Single Audit. For those entities expending between $1 million and $3 million in federal awards, a single audit would be required, but major program audit procedures would be focused on testing only two compliance requirements that is, allowable and unallowable costs and one additional requirement that would be selected by the federal agency responsible for the program. 49

51 OMB A-133 changes coming soon Changes for Larger Single Audits. For entities expending more than $3 million in federal awards, a full single audit would be required. However, the proposal indicates that federal agencies may identify subsets of compliance requirements that they believe most effectively address improper payments, waste, fraud, abuse, and program performance and require additional testing for those requirements. 50

52 Classification of Gifts of Securities in the Statement of Cash Flows Many not-for-profit entities (NFPs) that receive donations in the form of securities sell the securities immediately after receipt, thus converting them to cash. The issue before the Task Force was whether cash inflows (that is, proceeds) resulting from the immediate sale of donated securities should be classified as operating or investing inflows in the NFP s statement of cash flows. 51

53 Classification of Gifts of Securities in the Statement of Cash Flows The Task Force issued draft guidance to clarify that NFPs would classify cash inflows from gifts of securities that, under an entity s policies, are directed to be sold upon receipt and readily convertible to cash, in the operating activities section of the statement of cash flows. Financing classification in the statement of cash flows would be appropriate, however, if the donor restricts the use of the contribution for other purposes, such as acquiring long-lived assets or increasing a term or permanent endowment. 52

54 Agenda AICPA Not-for-Profit Expert Panel Update: o Expert Panel - Roles and Responsibilities o Audit Risk Alert o TPA's relevant to NFP's o Fair value white paper o Current projects and issues o FASB Activities -NFP Advisory Committee ("NAC") 53

55 AICPA Not-for-Profit Expert Panel Update Expert Panel Roles & Responsibilities Mission Identifying emerging industry issues - financial reporting, audit and attest services, and regulatory matters - and proposing solutions Liaising with regulators, standard setters, external industry groups, federal or state agencies, and other AICPA committees/expert panels Providing industry accounting and auditing guidance/information through various AICPA vehicles such as: o publications o webinars/webcasts o conferences 54

56 AICPA Not-for-Profit Expert Panel Update Expert Panel Roles & Responsibilities Members' Responsibilities Accounting and Audit Guide conforming changes Accounting and Audit Guide overhaul Audit Risk Alert Task Force Issue Committees White Papers (Issue Papers) Technical Practice Aids Assisting AICPA Technical Hotline Participating in AICPA NFP Conference 55

57 AICPA Not-for-Profit Expert Panel Update AICPA NFP Audit Risk Alert Published annually each year in April / May Developed by Expert Panel members Provides an overview of recent economic, industry, technical, regulatory, and professional developments that may affect an NFP's accounting, reporting and disclosure and the NFP's related audits and other engagements. identifies significant risks emerging issues current developments The ARA can also be used by the NFP's management to address areas of audit focus and concern 56

58 AICPA Not-for-Profit Expert Panel Update AICPA NFP Audit Risk Alert Selected 2012 ARA Topics Economic and industry developments Legislative and regulatory developments o Payments in lieu of taxes Audit and attestation issues and developments o Audit risks for NFPs o Supplementary and other information o Going concern risks o Related party transactions o Higher education issues o New Market Tax Credit program o Fair value measurements 57

59 AICPA Not-for-Profit Expert Panel Update AICPA NFP Audit Risk Alert Selected 2012 ARA Topics Audit and attestation issues and developments-continued o Pension plan reporting o Service organizations Accounting issues and developments o Reporting related entities o Credit quality and allowance for credit losses Recent pronouncements o Auditing, ASU's, & TPA's On the Horizon o Guide overhaul project Resource Central 58

60 AICPA Not-for-Profit Expert Panel Update AICPA Technical Practice Aids: Updates of most relevance to not-for-profit organizations TIS Section "Providing Opinion on a Schedule of Expenditures of Federal Awards in Relation to an Entity's Financial Statements as a Whole When the Schedule of Expenditures of Federal Awards Is on a Different Basis of Accounting Than the Financial Statements" o In certain instances, the SEFA may be presented on a different basis of accounting than the financial statements (e.g., cash basis, modified accrual basis) o Provide a reconciliation to the financial statements o Auditor is required to test pursuant to AU 551 (SAS 119) 59

61 AICPA Not-for-Profit Expert Panel Update AICPA Technical Practice Aid: Updates of most relevance to not-for-profit organizations TIS Section 9170, Supplemental Information.01 Consolidating Information Presented on the Face of the Financial Statements When the auditor is engaged to express an opinion only on the consolidated financial statements, and consolidating information is included on the face of the financial statements, such consolidating information would be considered supplementary information, the same as if the information was presented outside the basic financial statements. 60

62 AICPA Not-for-Profit Expert Panel Update AICPA Technical Practice Aid: Updates of most relevance to not-for-profit organizations TIS Section 9170, Supplemental Information.01 Consolidating Information Presented on the Face of the Financial Statements The auditor should be satisfied that the consolidating information is suitably identified. For example, the balance sheets might be titled Consolidated Balance Sheet December 31, 20X1, With Consolidating Information, and the columns including the consolidating information, might be marked Consolidating Information. 61

63 AICPA Not-for-Profit Expert Panel Update AICPA Technical Practice Aid: Updates of most relevance to not-forprofit organizations TIS Section / Certificates of Deposit and Fair Value Measurements and Disclosures" o o Certificates of Deposit do not typically meet the definition of a security and therefore are not at fair value and should not be included in the fair value table. There are certain circumstances in which certificates could meet the definition of a security (negotiable certificates of deposit), and then the provision of ASC 820 would apply. TIS Section "Balance Sheet Classification of Certificates of Deposit" o o o Certificates of deposit with original maturities of 90 days or less may be considered cash and cash equivalents However, if the original maturity is greater than 90 days, certificates of deposit would not be included in cash and cash equivalents Instead could be classified as "investments other" 62

64 AICPA Not-for-Profit Expert Panel Update AICPA Technical Practice Aid: Updates of most relevance to not-for-profit organizations TIS Section "Contributions of Certain Nonfinancial Assets, Such as Fundraising Material, Informational Material, or Advertising, Including Media Time or Space for Public Service Announcements or Other Purposes" Provides guidance for when to recognize contribution revenue for certain media services provided to NFPs. TIS Section "Multiyear Unconditional Promises to Give Measurement Objective and the Effect of Changes in Interest Rates" If an NFP has elected the fair value option for promises to give, subsequent measurement should be made using updated interest rates for discounting. Otherwise, the discount rate utilized should not be modified in future years. 63

65 AICPA Not-for-Profit Expert Panel Update AICPA white paper: Measurement of Fair Value for Certain Transactions of Not-for-Profit Entities Issued October 2011 Discusses fair value measurement for the following types of transactions: Unconditional promises to give cash or other financial assets Beneficial interests in trusts Split interest agreements Addresses, among other things, the following: Valuation approaches and techniques, including variations of the income approach using probability-weighted cash flows or a single set of cash flows model that uses a risk-adjusted discount rate 64

66 AICPA Not-for-Profit Expert Panel Update AICPA white paper: Measurement of Fair Value for Certain Transactions of Not-for-Profit Entities Addresses, among other things, the following: Considerations for determining an appropriate valuation technique based on facts and circumstances, as well as considerations for the related inputs to the valuation model Determination of an appropriate discount rate when using present value techniques Use of market inputs when valuing split-interest obligations, including use of actuarial data and prices for annuity contracts The unit-of-account for unconditional promises to give that are expected to be collected in one year or more and for beneficial interests in a trust Disclosure considerations 65

67 AICPA Not-for-Profit Expert Panel Update Current projects and issues: Accounting and Audit Guide (AAG) conforming changes and update Conforming changes process occurs annually Incorporates o New accounting standards o New TPA's o New audit standards An updated edition of the AAG incorporating conforming changes is issued each May 66

68 AICPA Not-for-Profit Expert Panel Update Current projects and issues: Accounting and Audit Guide (AAG) Overhaul First major overhaul since originally issued in 1996 Complete overhaul of all chapters and subject matters in the AAG including reorganization new chapters clarifying guidance diversity in practice more examples expanded and improved audit guidance in each chapter recent issues approved by FinRec and FASB Expected to be issued in

69 AICPA Not-for-Profit Expert Panel Update Current projects and issues: AICPA Expert Panel GIK Task Force Valuation and revenue recognition challenges related to non-financial assets that are not subsequently sold o Distributed to beneficiaries free of charge Expose articles surrounding pharmaceuticals o Limited resources of fair value information o Increasingly complex valuation standards o Bargain purchase--with or without donative intent o Reporting GIK in agency transactions o Lack of consistency and comparability in NFP's financials 68

70 AICPA Not-for-Profit Expert Panel Update Current projects and issues: AICPA Expert Panel GIK Task Force Overall challenges o Market participants o Donor or legal restrictions o Principal or most advantageous market o Inputs to value o Use of hypothetical markets Proposed white paper and checklist on the process of valuing GIK: o Acceptance o When to recognize o How to value o How to recognize the distribution 69

71 AICPA Not-for-Profit Expert Panel Update Current projects and issues: Other current topics Alternative Investments Practice Aid update Contributed life insurance FV at date of contribution vs. contract value Time restrictions on pledges if purpose is met is payment schedule a restriction? Fundraising costs related to assets or other inventory expense as incurred vs. capitalization Program related investments investment vs. contribution a little of both? Reporting contribution portion of charitable gift annuity as unrestricted regardless of state requirements for reserves legal restriction creep 70

72 AICPA Not-for-Profit Expert Panel Update Current projects and issues: Other current topics Investment expenses presentation embedded expenses Recognition of beneficial interests in trusts held by others when information to measure is unavailable-not recordable? scope limitation? Subsequent measurement of other investments all or nothing Government grants-contribution or exchange Bequests receivable once through probate UR or TR? Donation of land with conservation easement o required to be held in perpetuity by donor o not required to be held in perpetuity by donor o Easement alone is an intangible asset 71

73 AICPA Not-for-Profit Expert Panel Update Current projects and issues: Other current topics Interests in other entities o Interests as investments for total return o Other interests (operating entities) Auditing guidance-issues unique to NFPs o Significantly expanded guidance for issues unique to NFPs Excise taxes o An income tax subject to FAS 109 (deferred assets /liabilities) Program related investments o A new separate chapter o Loan programs o Other activities 72

74 FASB NFP Advisory Council FASB NFP Advisory committee (NAC) Created by FASB/FAF (FAF-Financial Accounting Foundation-FASB and GASB's parent organization) in October 2009 to serve as a standing resource for the FASB in obtaining input from the NFP sector on: o Existing guidance o Current and proposed technical agenda projects o Longer-term issues affecting those organizations 17 members, plus 3 participating observers o NFP financial officers, auditors, foundation and other donors, creditor, watchdog agency, charities regulator, attorney Also created NFP Resource Group to supplement work of NAC and staff 73

75 FASB NFP Advisory Council FASB NFP Advisory committee (NAC) Three NAC subgroups worked to identify potential improvements in NFP financial reporting for discussion at Sept 11 NAC meeting. Reporting financial performance SOA and Cash flows and related notes Reporting liquidity / financial health Balance sheet and related notes "Telling the story" MD&A, segment reporting, summary financials Recommended areas for potential improvement to the FASB, via standard-setting or educational efforts. 74

76 FASB NFP Advisory Council FASB's NAC In October 2011, the NAC identified four areas for improving NFP financial reporting for agenda consideration by the FASB. Their objectives would be: 1. To improve the current net asset classification scheme, in conjunction with improving how liquidity is portrayed in an NFP s statement of financial position and related notes. 2. To improve the statements of activities and cash flows to more clearly communicate financial performance, by better disaggregation and classification of information within the statement of activities and better cohesiveness between the statements. 75

77 FASB NFP Advisory Council FASB's NAC 3. To develop a framework for an NFP s directors and management to provide commentary and analysis about the organization s financial health, operations, and liquidity. 4. To review existing NFP-specific disclosure requirements to streamline where possible and otherwise improve their relevance and understandability. Additionally, the NAC identified some educational efforts that could be carried out by the FASB staff, the NAC, or other organizations (e.g., the AICPA). 76

78 FASB NFP Advisory Council FASB's NAC In November 2011, the FASB announced the addition of two agenda projects: o Standard-setting project - focus on the financial statements and related notes that are unique to not-for-profit organizations. o Research project - study other means of communication that not-for-profit organizations currently use in telling their financial story. 77

79 Any questions? 78

80 Contact Information Norm Clark Partner, Not-for-Profit & Higher Education Practice T: E: Claire Esten Senior Manager, Not-for-Profit &Higher Education Practice T: E: 79

81 Disclaimer This Grant Thornton LLP presentation is not a comprehensive analysis of the subject matters covered and may include proposed guidance that is subject to change before it is issued in final form. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this presentation. The views and interpretations expressed in the presentation are those of the presenters and the presentation is not intended to provide accounting or other advice or guidance with respect to the matters covered. For additional information on matters covered in this presentation, contact your Grant Thornton LLP adviser.

82 Thank you for attending To retrieve your CPE certificate: Respond to online evaluation form Print your CPE Certificate from the CPE confirmation or participation tab *Note: Group participation will not receive CPE Download today s slides as a reference resource 81 81

83 Thank you for attending. Visit us online at: twitter.com/grantthorntonus linkd.in/grantthorntonus For questions regarding your CPE certificate, contact Learnlive at