by Josh Bryant
Throughout the calendar year, the Financial Accounting Standards Board, or FASB, meets in order to deliberate on proposed standards and amendments. On March 30, 2016, the authoritative board redeliberated on Topics 954 and 958- of which relate to the presentation of Financial Statements of Not-for-Profit Entities. These pronouncements affect entities that are required to evaluate whether they should consolidate certain legal entities either using the variable interest entity, or the voting interest entity model for consolidation of limited partnerships and similar legal entities.
The discussion was primarily focused on the effective date and the transition method utilized for any not-for-profit or health care entity for which the standard applies.
Effective Date
The Board has decided that the amendments will take affect for financial statements relating to fiscal years beginning after December 15, 2017, and for interim statements following December 15, 2017.
Transition Method
“The Board has decided that not-for-profit entities, or NFPs, should apply the amendments on a retrospective basis for all years presented in the financial statements.” The Board also made concessions for NFPs during this transitional stage to enable the organization to do so cost effectively. The following two items are optional for any organization that uses presents financials statements on a comparative basis for any years before adoption:
- Analysis of expenses by both functional and natural classification.
- Disclosures regarding liquidity and availability of resources.
Furthermore, the Board decided it would be permitted for NFPs to present interim financial statements in the year of adoption as they did prior to the amendment, however, subsequent restatement of the financial statements at year-end would be required on a retrospective basis.
The Board also discussed the application of the consolidation process for not-for-profit entities that are a general partner in a for-profit limited partnership. A result of these discussions is still forthcoming, however, they have decided to reinstate the current guidance that existed in Subtopic 910-20, Consolidation- Control of Partnerships and Similar Entities, and included it within Subtopic 958-810, Not-For-Profit Entities- Consolidation.
To conclude, however long it may be before these amendments become effective- it is always prudent to plan ahead in order to maintain forward longevity in the competitive business environment for not-for-profits.
If you have additional questions about these differences, please contact our office. We would appreciate the opportunity to share with you the impact to your organization and ways to prepare for the upcoming changes.
Josh ([email protected]) is an audit staff working primarily with not-for-profits and healthcare organizations.
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