A key AICPA committee has expressed concern that FASB's proposed changes to not-for-profit accounting standards would lead to a further divergence between the financial reporting models of not-for-profits and for-profit businesses.
The AICPA Financial Reporting Executive Committee (FinREC) expressed support for FASB's intentions to improve financial reporting and disclosure for not-for-profits, but also described concerns in a comment letter dated Aug. 11 and signed by FinREC Chair Jim Dolinar and Not-for-Profit Expert Panel Chair Cathy Clarke.
In April, FASB issued Proposed Accounting Standards Update, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities. FinREC recommended that FASB move ahead with changes that are specific to not-for-profits, such as changes to the net asset classifications, reporting of underwater endowments, and releases of restrictions on capital gifts.
But FinREC encouraged FASB to suspend separate deliberations on aspects that intersect with projects for business entities until FASB's direction with respect to business entities is clearer. These areas would include a prescribed operating/nonoperating distinction, and changes to the cash flow categories.
As an alternative to FASB's proposed operating measures, FinREC recommended developing a measure for results of operations for all not-for-profits that is similar to the performance indicator used by not-for-profit health care organizations today.