Statements of Not-for-Profit Entities

Transcription

1 Financial Statements of Not-for-Profit Entities June 16, 2016 BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the BDO KNOWLEDGE Webinar Series Financial Statements of Not-for-Profit Entities international BDO network of independent member firms. Page 1

2 Presenters Kenneth C. Euwema Vice President, Controller United Way Worldwide Phone (703) Lee Klumpp, CPA, CGMA National Assurance, Director Nonprofit and Education BDO USA, LLP Phone: (703) Page 2

3 AGENDA Overview of Proposed NFP Accounting Standards Update Key Objectives Feedback Tentative Board Decisions Next Steps Q&A Page 2

4 NFP FINANCIAL STATEMENTS PROJECT KEY OBJECTIVES (recommended by FASB s NFP Advisory Committee (NAC)) Update, not overhaul, the current model Improve net asset classification scheme Improve information in financial statements and notes about: - Financial performance - Cash flows - Liquidity Better enable NFPs to tell their financial story Page 4

5 WHO DID WE HEAR FROM? 264 Comment Letters 135 Preparers 90 Auditors 12 Users 1% 5% 9% Respondent Type Preparer Auditor 4 Academics 23 Individuals and Others 34% 51% User Academic Other Page 5 5

6 TYPES OF PREPARERS WE RECEIVED COMMENT LETTERS FROM Preparer Industry Type Page 6 *Including Institutionally Related Foundations 6

7 SPECIFIC ELEMENTS OF THE PROPOSAL TENTATIVE BOARD DECISIONS Page 7 7

8 Phase 2: need to decide whether to wait to deliberate at same time as the Financial Performance Reporting project for business entities Page 8 8

9 PHASE 1 NET ASSETS Current GAAP Unrestricted Temp. Restricted Perm. Restricted Proposed GAAP + Disclosures Without Donor Restrictions Amount, purpose, and type of board designations * With Donor Restrictions Nature and amount of donor restrictions * New disclosure requirement Page 9 9

10 UNDERWATER ENDOWMENTS Revised net asset classification To be reflected in net assets with donor restrictions rather than in net assets without donor restrictions Enhanced disclosures In addition to aggregate amounts by which funds are underwater (current GAAP), also disclose aggregate of original gift amounts (or level required by donor or law) for such funds, fair value, and any governing board policy or decision to reduce or not spend from such funds. Page 10 10

11 EXPIRATION OF CAPITAL RESTRICTIONS Gifts of cash restricted for acquisition or construction of PP&E NFPs would be required to use the placed-in-service approach (no more implied time restrictions) Page 11 11

12 EXPENSE REPORTING Report expenses, either on the face of financial statements or in the notes, by: Function * Natural classification Analysis (disaggregate function by nature) * currently required in GAAP NFPs required to provide disclosures about methods used to allocate costs among program and support functions Page 12 12

13 REPORTING OF INVESTMENT RETURNS How to present? Net presentation of investment expenses against investment return on the face of the statement of activities Netting limited to external and direct internal expenses What to disclose? Disclosure of investment expenses no longer required, No longer require disclosure of investment income components Page 13 13

14 LIQUIDITY AND AVAILABILITY NFPs required to provide: Qualitative information on how an NFP manages its liquid available resources and its liquidity risk (in the notes) Quantitative information that communicates the availability of an NFP s current financial assets at the balance sheet date to meet cash needs for general expenditures (on the face and/or in the notes) Page 14 14

15 CASH FLOW STATEMENT Allow free choice between the Direct Method and the Indirect Method Indirect reconciliation no longer required for Direct Method Page 15 15

16 OPERATING MEASURE: IMPROVED DISCLOSURES For those NFPs that utilize an operating measure and show governing board designations, appropriations, and similar actions (internal transfers) in the measure These NFPs must report these types of internal transfers appropriately disaggregated and described by type (either on the face of the financial statements or in the notes) Page 16 16

17 EFFECTIVE DATE, EARLY ADOPTION, AND TRANSITION Effective Date: For fiscal years beginning after 12/15/2017 Interim financials the following year Early Adoption: Permitted, but must apply the regular transition provisions. Transition: For year of adoption: apply all provisions. For comparative years presented: apply all provisions, except can choose not to present: (1) Analysis of expenses by nature and function, and/or (2) Disclosures around liquidity and availability of resources Page 17 17

18 EXAMPLE OF EARLY ADOPTION Choose to early adopt in FY Apply all provisions to FY If choose to present comparative financials for FY , apply all provisions to FY , except can choose not to present: (1) Analysis of expenses by nature and function, and/or (2) Disclosures around liquidity and availability of resources Page 18 18

19 IMPORTANT NOTES NFPs are already permitted to incorporate many of the changes in the ASU The only changes that cannot be done without formally adopting the ASU are: (1) Presenting one class of restricted net assets (consolidating temporarily and permanently restricted) (2) Underwater endowment accounting (3) Eliminated disclosures of investment return components and netted expenses (4) Eliminated requirement to provide indirect reconciliation if using direct method for operating cash flows Page 19 19

20 NEXT STEPS Page 20 20

21 PROJECT TIMELINE: NEXT STEPS End of Comment Period on Exposure Draft August 2015 Board Meetings Redeliberations on topics in Phase 1 December 2015 March 2016 Begin redeliberations on Phase 2 2 nd half of 2016 October 28, 2015 Board Meeting Decision to split project into Phase 1 and Phase 2 Summer 2016 Goal to Issue ASU on Phase 1 Effective Date Fiscal years after 12/15/2017 Page 21 21

22 QUESTIONS? Page 22 22

23 BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, advisory and consulting services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through 63 offices and more than 450 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,408 offices in 154 countries. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. For more information please visit: Material discussed is meant to provide general information and should not be acted on without professional advice tailored to your firm s individual needs BDO USA, LLP. All rights reserved. Page 23