The FASB Not-for-Profit (NFP) Advisory Committee (the Committee) held its semiannual meeting on Thursday, March 20, 2025. The topics discussed included the following.
Agenda Consultation—Committee members received an overview of the Agenda Consultation process and timeline. Committee members provided feedback on financial accounting and reporting topics that the Board should and should not consider a priority for possible future standard setting. Committee members suggested the following as higher priority topics for consideration (in no particular order):
(1) develop standardized NFP operating measures given the diversity in practice and consequent lack of comparability in the sector;
(2) exclude NFPs with conduit debt or other public debt from various public entity definitions in generally accepted accounting principles (GAAP) and, instead, group those entities with other NFPs for accounting and transition matters;
(3) improve the NFP consolidation guidance, which can be difficult to navigate and apply;
(4) review the accounting for public-private partnerships under Governmental Accounting Standards Board (GASB) guidance and similar types of transactions under FASB guidance, which can result in different accounting outcomes;
(5) improve certain aspects of liquidity disclosures;
(6) improve the utility of the statement of cash flows by either reconsidering the presentation of specific items (such as interest and dividends from long-term investments held in endowments) or doing a more holistic review of the statement; and
(7) require greater disaggregation of the components of investment returns, especially the separation of realized and unrealized gains and losses, on the statement of activities or in the notes.
A Committee member indicated that the accounting for below-market and interest-free loans to NFPs should not be a priority area because the existing guidance is appropriate and the challenges that some face in application often are facts-and-circumstances based.
Recent Implementation of Standards—FASB staff provided an update on the implementation of certain standards since the September 2024 Committee meeting. Committee members provided feedback on the following Topics:
- Leases—Topic 842, Post-Implementation Review (PIR)—Committee members indicated that Topic 842, Leases, has increased the decision usefulness of information provided by improving comparability and the transparency of an NFP’s leasing activities. Committee members also indicated that while implementation costs were significant, the ongoing application costs have not been.
- Credit Losses—Topic 606 Receivables—Committee members generally supported the amendments in the proposed Accounting Standards Update, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-Profit Entities, noting that the scope of the project should be expanded to include all NFP entities.
Select FASB Technical Agenda Projects—FASB staff provided an update on the following:
- Topic 815—Derivatives Scope Refinements—Committee members provided feedback that Issue 2 of the project (share-based payment received from a customer) is not prevalent for NFPs and that Issue 1 (additional derivative scope exception) would be a helpful clarification for health care entities with certain risk-based revenue contracts.
- Accounting for and Disclosure of Software Costs—Committee members expressed support for the Board’s efforts to modernize the accounting for software costs and said that the amendments in the proposed Accounting Standards Update, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, would make the guidance more relevant for how software is currently developed. Committee members noted that implementation of the proposed amendments would not be costly or take a significant amount of time for most NFP entities but that a deferred effective date may still be useful for those entities.
- Codification Improvements—Committee members generally supported the amendments in the proposed Accounting Standards Update, Codification Improvements. They agreed that these proposed changes would not have a significant effect on current accounting practice and recommended removing paragraph 958-310-35-3 (instead of finalizing the proposed amendments) for Issue 25, “Clarify Accounting for Certain Receivables by Not-for-Profit Entities.”
- Accounting for Environmental Credit Programs—One Committee member who is a financial statement user supported the disclosures in the proposed Accounting Standards Update, Environmental Credits and Environmental Credit Obligations (Topic 818), and stated that those disclosures align with the information that analysts would like to see. Another Committee member suggested clarifying in the Scope Section of Subtopic 958-605, Not-for-Profit Entities—Revenue Recognition, that environmental credits granted by a regulator to an NFP (which that member expects to be rare) would be accounted for in accordance with Topic 818 (if finalized).
Research Agenda—FASB staff provided an update on the following:
- Accounting for and Disclosure of Intangibles—Committee members provided feedback that (1) the most significant comparability issues relate to the accounting for acquired intangibles and internally developed intangibles and (2) it would be costly to identify and subsequently measure internally developed intangibles.
Emerging Financial Reporting Issues in the NFP Sector—The Committee chair summarized the closed session discussion with Committee members. He indicated that two of the topics discussed—requests for better disaggregation of investment return and for improvements to the cash flow statement—were already mentioned in the feedback provided on the Agenda Consultation. During the closed session, Committee members also discussed areas of inconsistency
- (1) between the FASB’s guidance versus the GASB’s guidance (for example, on leases and subscription-based information technology arrangements) and
- (2) between the FASB’s guidance for government grants to NFPs versus its proposed guidance for business entities.
Finally, the Committee also briefly observed that the FASB staff has not recently received technical inquiries on how to account for potential changes in funding.
Thanks for reading CPA Practice Advisor!
Subscribe Already registered? Log In
Need more information? Read the FAQs
Tags: Accounting
