T H E S O C I E T Y F O R F I N A N C I A L E D U C A T I O N A N D P R O F E S S I O N A L

D E V E L O P M E N T, I N C .

8 T H A N N U A L F I N A N C I A L L I T E R A C Y L E A D E R S H I P C O N F E R E N C E

F A S B E X P O S U R E D R A F T

2

F I N A N C I A L S T A T E M E N T P R O J E C T

• Last overhaul 20 years ago• FASB NFP Advisory Committee (NAC)• Project objectives:

– Refresh the current model, to better tell the financial story– Improve net asset classification, liquidity information, financial

performance and cash flow statement

October 27, 2015

3

R E A S O N S F O R T H E P R O P O S E D U P D A T E

• Complexity of the current three classes of net assets

• Inconsistency in reporting• Inconsistencies in the type of information

provided about expenses of the period• Opportunity to enhance the usefulness of the

statement of cash flows

October 27, 2015

4

M A I N P R O V I S I O N S

• Net asset classes• Liquidity information• Activity statement• Cash flow statement• Project timeline

October 27, 2015

5

N E T A S S E T S

Source: Financial Accounting Standards Board

October 27, 2015

6

S T A T E M E N T O F F I N A N C I A L C O N D I T I O N

• Issues: Misinterpretation of temporary restrictions, temporary v. permanent restrictions

• Changes: – 2 classes of net assets from 3– Without donor restriction and with donor restriction– Added guidance to require disclosure of information to asses a NFP

liquidity position

October 27, 2015

7

S T A T E M E N T O F A C T I V I T I E S

• Present on the statement of activities amounts for the 2 classes of net assets

• Subtotals for Operational Activities• Subtotal for Operational internal transfers in/out• Subtotal for Non Operational activity

October 27, 2015

8

O N E S T A T E M E N T A P P R O A C H

Source: Financial Accounting Standards Board

October 27, 2015

9

T W O S T A T E M E N T A P P R O A C H

Source: Financial Accounting Standards Board

October 27, 2015

10

T W O S T A T E M E N T A P P R O A C H ( c o n t ’ d )

Source: Financial Accounting Standards Board

October 27, 2015

11

S T A T E M E N T O F C A S H F L O W S

• Direct method• Operating – acquisition and sales of long term

assets• Financing – payments of interest• Investing – Interest and dividend income

October 27, 2015

12

C A S H F L O W S T A T E M E N T

• Require Direct Method for operating cash flows– No longer require Indirect Method– Should indirect method still be required for certain NFPs?

• Re-categorize certain items to better align operating cash flows with the operating measures– Purchases of & proceeds on sales of long-lived assets (e.g., PP&E;

capitalized and non-capitalized collections)– Cash gifts from interest & dividends– Interest paid on long-term debt

October 27, 2015

13

E N H A N C E D D I S C L O S U R E S

• Governing board designations• Description of how the net assets with donor

restrictions affect the use of resources• Management of liquidity information• Expenses by nature and function

October 27, 2015