Nonprofit GAAP Accounting Update

Transcription

1 Nonprofit GAAP Accounting Update June 21, Armanino LLP amllp.com Armanino LLP amllp.com

2 About the Presenters Paul O Grady, CPA, Partner, Not-For-Profit Practice Leader Armanino LLP Paul heads up the nonprofit practice at Armanino and has more than 19 years of experience serving nonprofit organizations. Paul is a member of the AICPA and the California Society of CPAs. He also serves on the accounting standards technical committee at the firm and is a member of the Executive Board of East Bay Economic Development Alliance. Paul graduated from University College in Galway, Ireland, with a bachelor s degree in Economics and Political Science. 2 Armanino LLP amllp.com

3 About the Presenters Monika I. Pelz, CPA, Partner Armanino LLP Monika has been assisting nonprofit organizations with their accounting and compliance needs for 18 years. She graduated from Sonoma State University where she received her B.S. degree in Business, with an emphasis in Accounting. She is a Certified Public Accountant and a member of both the AICPA and the California Society of Certified Public Accountants. Prior to joining Armanino, Monika was a senior manager with Ernst & Young LLP. 3 Armanino LLP amllp.com

4 Presentation Overview Identify current accounting standards in effect for not-for-profits (NFPs) and what s new or updated standards on the horizon Current Projects of FASB Nonprofit Advisory Committee (NAC) Q&A 4 Armanino LLP amllp.com

5 FASB ASU No Compensation, Retirement Benefits, Multiemployer Plans: Disclosures about an Employer's Participation in a Multi-employer Plan o Additional quantitative and qualitative disclosures o Does not change current recognition and measurement o Currently effective for all NFPs 5 Armanino LLP amllp.com

6 FASB ASU No (continued) What should be disclosed? Significant multi-employer plans in which the employer participates The name of the plan(s) and identifying number(s) Level of participation in the plan(s) The financial health of the significant multi-employer plans o Including an indication of the funded status The nature of the employer s commitments to the plan(s) 6 Armanino LLP amllp.com

7 FASB ASU No (continued) Disclose if information about the plan is unavailable A description of the nature of the plan benefits o Other quantitative information to help users understand the financial information 7 Armanino LLP amllp.com

8 FASB ASU No Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows Purpose: To address the diversity in practice Effective prospectively for fiscal years beginning after June 15, Armanino LLP amllp.com

9 FASB ASU No Services Received from Personnel of an Affiliate Personnel services received from an affiliate (parent/sub or common control) for which the affiliate doesn t charge the recipient nonprofit should be recognized in the recipient nonprofit s financial statements, measured at the actual costs incurred by the affiliate Effective for fiscal years beginning after June 15, 2014 Prospective adoption 9 ArmaninoLLP amllp.com

10 Programmatic Investments Benefits to constituencies in the form of financial instruments o Primary purpose is the achievement of the NFP's programmatic mission o Possibility of producing financial returns, and, thus, they share characteristics with an NFP's traditional investments 10 ArmaninoLLP amllp.com

11 FASB Updates and Activities of the Nonprofit Advisory Committee (NAC) 11 Armanino LLP amllp.com Armanino LLP amllp.com

12 FASB NAC Project: Financial Statements NFP Financial Reporting: Financial Statements Objective: Re-examine existing standards for financial statement presentation, focusing on improving: o Net asset classification o Information in Financial Statements o Statement of Functional Expenses 12 Armanino LLP amllp.com

13 FASB NAC Project: Financial Statements NFP Financial Reporting: Financial Statements Current status: March 2014 Intermediate measure of operations Direct method of reporting on SCF An exposure draft is scheduled for later in Armanino LLP amllp.com

14 FASB NAC Project: Financial Statements Presentation of net-asset classes o The key tentative decisions reached by the FASB board with regard to net asset classes and presentation of restrictions are as follows: Move from three to two categories of net assets Similar presentation for changes in net assets Terminology and definitions of the net asset classes. 14 Armanino LLP amllp.com

15 FASB NAC Project: Financial Statements Presentation of net-asset classes The key tentative decisions reached by the FASB board with regard to net asset classes and presentation of restrictions are as follows: o Two classes of net assets: With donor-imposed restrictions Without donor-imposed restrictions o Disclose board designations of net assets without donor-imposed restrictions 15 Armanino LLP amllp.com

16 FASB NAC Project: Financial Statements Statement of Activities Operating measures to be based on: o Mission dimension o Availability dimension Decisions on presentation of functional expenses o All entities will present expenses both by natural and functional classification in: Statement of activities, Separate statement of functional expenses, or Schedule notes 16 Armanino LLP amllp.com

17 FASB NAC Project: Financial Statements Require direct method of reporting cash flows Remove requirement to reconcile change in net assets to net cash flows from operating activities Better align categories with intermediate measure of operations Cash gifts to purchase long-lived assets for operating purposes would be operating, not financing Cash payments to purchase long-lived assets for operating purposes would be operating, not investing Cash dividends and interest income investing Interest payments- financing 17 Armanino LLP amllp.com

18 FASB NAC Project: Disclosure Suggestions Fair value levels Consolidate the investment, endowment, and fair value disclosures Enhance liquidity disclosures Move away from boilerplate disclosures Show greater detail about the property, plant, and equipment note More specific information about tax-exempt status 18 Armanino LLP amllp.com

19 FASB NAC: Financial Statements Next Steps Complete Board deliberations (first half of 2014). Topics include: o Format(s) for operating activities and other changes including applications to specific industries (e.g., foundations) o Liquidity and financial flexibility o Notes to financial statements o Transition Exposure Draft proposed ASU for comments (est. mid-2014) o Comment period more outreach, field visits, testing, roundtables, etc.) Re-deliberations followed by final ASU issuance (est. mid-2015) 19 Armanino LLP amllp.com

20 FASB NAC: Financial Statements - Other Not-for-Profit Financial Reporting: Other Financial Communications (NFPOFC) project: Management Discussion and Analysis Status o Resources o FASB Scope 20 Armanino LLP amllp.com

21 FASB NAC Considerations: Upcoming Topics Remaining Presentation Issues Application of Intermediate Measure of Operations o Foundations? Liquidity o Classified Balance Sheet? Capital Transactions o Expiration of restrictions on funds used for acquisition of long lived assets? 21 Armanino LLP amllp.com

22 Accounting for Goodwill for Nonprofits (and Private Companies) New FASB project from November 2013, outgrowth of Private Company Council (PCC) project Considering four alternatives: o The PCC alternative o Amortization of goodwill over its useful life not to exceed a maximum number of years o Direct write-off of goodwill o Simplified impairment test 22 Armanino LLP amllp.com

23 Active FASB Project: Activities of PCC PCC proposes changes in GAAP for private companies that require endorsement by FASB PCC does not apply to not-for-profit organizations Three PCC issues have been accepted by FASB and resulted in 2 ASUs issued January 2014; third ASU to be issued in March 2014 FASB has agreed to consider whether and how nonprofit entities should be allowed to apply some of these issues also These represent alternatives that can be selected 23 Armanino LLP amllp.com

24 FASB and IASB Joint Projects - Revenue Recognition Question Response Why should you be interested? Revenue recognition policies of almost all entities will be effected Virtually all industry-specific guidance will be superseded What s the status? Final standard issued ASU When would it be effective? 2017 for calendar year-end public companies 2018 for calendar year-end private companies 24 Armanino LLP amllp.com

25 FASB and IASB Joint Projects - Leases Question Why should you be interested? What s the status? What themes have come through in comment letters and roundtables? Response Accounting by lessees and lessors could change drastically Revised ED issued in May 2013 Roundtables held in Q3 and Q Tentative decision reached in May 2014, but re-deliberations will continue Nearly 600 comments letters on this ED were received Generally not supportive of model in revised ED Differing opinions on how to move forward: - Do away with Type A/B model - Disclosure only standard What s next? Re-deliberations continue beginning May 22, Armanino LLP amllp.com

26 What Questions Do You Have? 26 Armanino LLP amllp.com

27 Armanino LLP Certified Public Accountants & Consultants Paul O Grady, CPA Monika Pelz, CPA phone: Paul@amllp.com phone: Monika.Pelz@amllp.com Participants will receive an within 3 business days with access to their certificate of completion. 27 Armanino LLP amllp.com Armanino LLP amllp.com