1 / 36

FASB Up-date F or the Government & Nonprofit Section’s 2008 Mid Year Meeting in San Antonio

FASB Up-date F or the Government & Nonprofit Section’s 2008 Mid Year Meeting in San Antonio. Presented by Teresa P. Gordon University of Idaho tgordon@uidaho.edu 208-885-8960. Uncle Sam is Watching NFPs. Charitable reform still on the Congressional agenda

lan
Download Presentation

FASB Up-date F or the Government & Nonprofit Section’s 2008 Mid Year Meeting in San Antonio

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. FASB Up-dateFor the Government & Nonprofit Section’s 2008 Mid Year Meeting in San Antonio Presented by Teresa P. GordonUniversity of Idahotgordon@uidaho.edu208-885-8960

  2. Uncle Sam is Watching NFPs • Charitable reform still on the Congressional agenda • Reforms to Red Cross governance structure • GAO report on uncompensated care and community benefits provided by hospitals • Senate Finance Committee - Endowment info requested from C&Us with endowments > $500 million

  3. Key Issues I’ll Cover • Revisions in Form 990 • New standards impacting NFP entities • UPMIFA • Other standards “in progress” at FASB Then Dana Forgione will tell us how these and other issues impact the health care industry

  4. and improved Radically redesigned with many more schedules For 2009 filings(fiscal years beginning in 2008) Form 990

  5. Compensation reporting now based on W-2 and Form 1099 • Part I, number of employees & volunteers • Part V, number of W-2 and 1099 forms issued • Part VII, Reports on compensation of officers, directors, key employees, and five highest paid employees (> $100K) • Schedule J – Discloses compensation for all (other) individuals with reportable compensation greater than $150K or total compensation of $250K • Part IX - Statement of functional expenses will still be based on fiscal year

  6. Partial list of schedules • Schedule A - Public Charity Status and Public Support. • Schedule D - Supplemental Financial Statements. • Schedule E - Schools • Schedule F - Statement of Activities Outside the United States. • Schedule G – Supplemental Info Regarding Fundraising • Schedule H - Hospitals • Schedule J - Compensation Information. • Schedule K - Supplemental Information on Tax Exempt Bonds. • Schedule L - Transactions with Interested Persons. • Schedule M – Non-cash Contributions • Schedule R - Related Organizations and Unrelated Partnerships.

  7. Overall Analysis of Changes? • An exciting bonanza of new information for future researchers! • Corporate governance & compensation • Fund raising & noncash contributions • Schedule D – almost like notes to FS! • A burden on charities to prepare many more schedules and disclose more information • Donors should benefit from clearer information on the cover page

  8. Recent FASB publications relevant to not-for-profit organizations • FAS155, Accounting for Certain Hybrid Financial Instruments • FAS157, Fair Value Measurements • FAS158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans • FAS159, The Fair Value Option for Financial Assets and Financial Liabilities • FIN48, Accounting for Uncertainty in Income Taxes • FSP FAS 126-1, Applicability of Certain Disclosure and Interim Financial Reporting Requirements for Obligors of Conduit Debt Securities • EITF 06-2, “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43” • EITF 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)”

  9. How a NFP can be a public entity • FSP FAS 126-1 - An entity that is an obligor for conduit debt securities that are traded in a public market meets the definition of a public entity • Result: • Required disclosures under FAS60 (oil & gas) and FAS126 (financial instruments) • APB28 Interim reporting • FAS109 & FIN48 Income taxes • Pension disclosures (FAS132R, FAS158) • Both NFP industry audit guides

  10. Statement 157:Approach to Measuring Fair Value THE ASSET OR LIABILITY Unit of Account Highest and Best Use Valuation Premise Exit Market Market Participant Assumptions Inputs to Valuation Techniques Attribute Value to Asset or Liability at Unit of Account Level Fair Value Measurement Indicated Value Unit of Valuation F/S Presentation and Disclosure

  11. From Journal of Accountancy, November 2007 article by Miller and Bahnson

  12. Statement 157, Resource Slide #7:Fair Value Hierarchy

  13. FAS157 – particular issues for NFPs • FAS116 All contributions are recorded initially at fair value, with the exception of certain collections and contributed services • FAS124 Most investments are carried at fair value. • FAS136 Requires assets held in a trust to be carried at fair value • Valuation issues: restrictions on assets

  14. Partial delay on FV implementation • FSP-FAS157-2 (issued Feb 14, 2008) • Provides for delayed application for certain nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008 • Examples: • Impairment of assets, asset retirement obligations – implementation deferred • Land carried in investments at fair value – deferral does not apply

  15. FAS158: Recognition Provisions • Funded status on balance sheet • Net periodic benefit cost unchanged • Reconciling amounts between funded status and cumulative amounts recognized in net periodic benefit cost: • Gains and losses • Prior service costs and credits • Transition assets and liabilities • Separate line item(s) apart from expenses • Either within or outside an intermediate measure of operations

  16. Derivatives & Fair Value Option • Rules on derivatives, hedging and the “fair value option” (FAS159) could affect NFPs • Many C&Us have interest rate swaps where FV option might be used • Another DIG item (B35) is related to the kind of split-interest agreements (life-income and gift annuities) that many NFPs have • In this case, permitted use of current interest rates would be simpler than bifurcation

  17. FIN 48: Uncertainty in Income Taxes • Applies to all entities, including NFPs • Unrelated taxable income • For-profit subsidiaries • Jeopardized tax-exempt status? • Assumes all tax positions will ultimately be examined by knowledgeable authorities IRS

  18. FIN 48 – Uncertain Tax Positions • The key points in the Interpretation are: • A tax benefit may be reflected in the financial statements only if it is more likely than not that the company will be able to sustain the tax return position, based on its technical merits • A tax benefit should be measured as the largest amount of benefit that is cumulatively greater than 50-percent likely to be realized IRS

  19. FIN 48 – Inventory of tax positions • Ability to sustain tax-exempt status for entity as a whole (are activities consistent with mission?) • Justification for classifying certain types of revenues as not subject to taxes on unrelated income • Potential “intermediate sanctions” for salaries and other issues • Interest on unrecognized tax benefits that are not deemed “more likely than not”

  20. FSP FIN48-2 (issued 2/1/08)Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises • FIN48 deferred for many but not all nonprofits. Now to be implemented for fiscal years beginning AFTER 12/15/07 • Not-for-profit that has publicly traded conduit debt is defined to be a PUBLIC entity and must apply FIN 48 for fiscal year 2007-2008 • See definition in amended FAS109 glossary (¶289)

  21. Coming Soon! • Proposed FSP SOP 94-3-a and AAG HCO-a Omnibus Changes • Consolidation and equity method issues for NFPs • NFP Mergers & Acquisitions • Revised “limited” ED in 2nd Qtr 2008 • Final versions to be issued later in 2008 • Proposed FSP on UPMIFA

  22. NFP Mergers & Acquisitions ProjectAnother ED this spring • Tentative: Merger ≠ Acquisition • Merger means original entities cede control to a new entity • Carryover method for mergers • Otherwise, acquisition method must be used • Other issues for re-deliberation • Donor-related intangible assets • Goodwill • Definition of a business or non-profit activity Pooling Purchase

  23. Codification identifies gaps and discrepancies • FSP SOP 94-3a and AAG HCO-a • Eliminate temporary control exception to consolidation • Require equity method for investments in for-profit partnerships & LLCs unless carried at fair value • Confirm applicability of several decisions regarding leases • EITF 07-1 (pending) • Equity method not permitted for “virtual joint ventures”

  24. Uniform Prudent Management of Institutional Funds Act (UPMIFA) • Approved July 2006 to replace 1972 UMIFA • Modernizes the law around investment management and endowment spending • Thus far, enacted by 13 states and being considered for enactment by several others (see table in handout) • Eliminates the concept of historic dollar value, in favor of more robust guidance on what constitutes “prudent” endowment spending • More short-term flexibility to handle declining investment markets • Optional 7% rebuttable presumption of imprudence

  25. Lone Star Differences UPMIFA is unique in Texas • Spending > 7% is the rebuttable presumption of imprudence EXCEPT FOR • Endowments less than $1 million, spending threshold > 5% • Endowments over $450 million,spending threshold > 9%

  26. UPMIFA Issues • How will SFAS 117 and 124 be applied in states that adopt UPMIFA? • What amount of an endowment will be considered “permanently restricted”? • Will the concept of “underwater” endowments as described in SFAS 124 be relevant in states following UPMIFA?

  27. Proposed FSP No. FAS 117-a • Tentative Title: Not-for-Profit Endowments: Net Asset Classification under the Uniform Prudent Management of Institutional Funds Act and Enhanced Disclosure Requirements • Objectives: • Provide guidance on net asset classification of donor-restricted endowment funds for not-for-profit organizations subject to UPMIFA • Improve disclosures about an organization’s endowment funds (both donor-restricted and board-designated), whether or not the organization is subject to UPMIFA

  28. Proposed FSP FAS 117-a’s Disclosure Requirements • Description of governing board’s interpretation of relevant law underlying net asset classification • Endowment spending policy • Endowment investment policy • Composition of endowment by net asset class with roll-forward by net asset class • Planned endowment distribution for next year

  29. Sample Endowment Composition Disclosure(presented for each balance sheet date)

  30. Sample Endowment Roll-Forward Disclosure(presented for each statement of activities period)

  31. Proposed FSP FAS 117-a: Comment Period and Effective Date • Proposed FSP to be released in mid-February for 60-day public comment period • Will be available on the FASB’s website www.fasb.org • Final FSP expected to be issued in mid-June • Would be effective for fiscal years ending after June 15, 2008, with early adoption (e.g., for May 31st year ends) permitted.

  32. Ongoing Projects of Interest to Not-for-Profit Sector • Conceptual Framework • Financial Statement Presentation • Revenue Recognition • Leases • Postretirement Benefit Obligations, including Pensions (Phase 2)

  33. Who sets standards? Convergence and related issues search :

  34. Changing Structure at FAF, FASB and GASB? More sources of nominees for FAF with final decision made by trustees. Size would be 14 to 16 each serving a single 5-year term. Reduce the size of the FASB from seven members to five, simple majority to pass standards (3 to 2) FASB (& GASB) chairs given authority to set technical agenda.

  35. Long-term: Even bigger issues! • As FASB and IASB converge, what will be the role of FASB? • IASB does not set standards for not-for-profit entities • IPSASB (International Public Sector Accounting Standards Board) does not set standards for not-for-profits • Does that leave FASB as the not-for-profit standard setter?

  36. For a copy of these slides • From my web site:http://www.cbe.uidaho.edu/tgordon • From the first page, click on “presentations” • Or send email to tgordon@uidaho.edu

More Related