It looks like the FASB plans on updating the now 20ish year old reporting standards for charitable/tax exempt entities.

Apart from their regrettable use of the misnomer "not for profit", it appears that net assets will be categorized only two ways; those with donor restrictions and those without. This is a simplification from the current unrestricted, temporarily and permanent restricted categories that have been required since the now superceded FASB Statement 117 was issued in 1993.

Also, they intend to prescribe an "operating metric" to ensure comparability between organizations; as of yet the discussion video doesn't explain this, and it remains to be seen how they propose to prescribe a "cookie cutter" one-size-fits all item that makes the Dead Horse Gulch Railroad Museum comparable to a megacharity like the American Cancer Society, even forgetting the differences in mission.

One final thing of note, the explanatory video available on FASB's website (for the sleepless everywhere)

http://www.fasb.org/jsp/FASB/Page/Secti ... 6156828276

indicates that they intend to REQUIRE the Statement of Cash Flows to prepared using the "direct method" as opposed to the "indirect" method, which compares applicable general ledger balances from one period to another.

For those that want the details, the differences between the two methods, there's a decent explanation here:

http://smallbusiness.chron.com/direct-v ... 65970.html

The FASB video admits that the SCF is not widely used (unlike the balance sheet and income statement which are steeped in antiquity, the SCF is a contrived statement first required with the issuance of FASB 95 in November of 1987). Here's what is important.

The direct method is generally considered superior, but in spite of encouragement, the additional effort and expense ensures that the FORTUNE 500 types will oppose a REQUIREMENT such as the one being proposed here.

Exposure drafts are followed by a comment period. Discuss how difficult the transition from indirect (I'll bet 90% plus use this method, conservatively) to direct method will be with your accounting staff AND outside auditor. This might be a change you want to comment negative upon.

As a practical matter, IF nobody is paying attention to the SCF, you can bet that requiring the direct method isn't going to encourage anybody but accounting ubergeeks to suddenly pay attention.

This might be something tax exempts/charities want to go to war over; my suspicion is they are using "us" as a basis to establish a foundation for making it a requirement for profit-making entities.

Thanks for the update and legwork.

It'll be interesting to see how long it take FASB to finalize this and how long it will take IRS to change the 990 and whether software companies such as Intuit and Sage incorporate the changes.

My bet is it'll be a few years !

Most of this should be relatively simple to implement -- after all how hard is it to add a column to a spreadsheet combiining temp and perm restricted amounts etc.

Bob H

"Most of this should be relatively simple to implement -- after all how hard is it to add a column to a spreadsheet combiining temp and perm restricted amounts etc."

Bob H


That part will be both a simplification and an improvement; and there could be a delay depending on the comments received and other factors; the downside will be the requirement to do the direct method statement of ash flows.

We have a bad problem with coal ash flows from Duke Power retention ponds in NC, but nobody would accuse them of being nonprofits.

dave