Financial Reporting

n FASB issued proposed FASB Staff Position FAS 117-a, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures.

“The issues addressed by this FSP have widespread importance to the not-forprofit sector, especially organizations with sizable endowments, and the users of their financial statements, such as donors, credit rating agencies, and regulators,” Jeffrey Mechanick, FASB project manager, said in a press release.

The proposed FSP provides guidance on classifying the net assets (equity) associated with donor-restricted endowment funds held by organizations that are subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006. The act serves as a model for states to modernize their laws governing donor-restricted endowment funds. A number of states have already done so, and more are expected to do so over the next few years.

The FSP, which is available at, would also require additional disclosures about endowments (both donor-restricted funds and boarddesignated funds) for all organizations, including those that are not yet subject to an enacted version of UPMIFA.

The provisions would be effective for fiscal years ending after June 15, 2008, with early application permitted for organizations that have not previously issued annual financial statements for that fiscal year.

n  FASB issued proposed FASB Staff Position SOP 90-7-a, An Amendment of AICPA Statement of Position 90-7. The FSP seeks to resolve a conflict between the guidance requiring early adoption of new accounting standards for entities required to follow fresh-start reporting under AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, and other authoritative accounting standards that expressly prohibit early adoption.

At the time SOP 90-7 was issued, new accounting standards were being issued with effective dates that encouraged early adoption. However, in several recent standards, FASB decided to prohibit early adoption. The FSP amends SOP 90-7 to nullify the requirement in paragraph 38 regarding changes in accounting principles. As a result of the amendment, an entity emerging from bankruptcy that uses fresh-start reporting only should follow the accounting standards in effect at the date of emergence.

The FSP is available at


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