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Top Three FASB Regulation Issues Regarding Not-For-Profits

Some issues regarding not-for-profit accounting practices are being debated by

In the ever-changing world of finance, it's important for CFOs and accounting staff to stay up to date on the proposed changes to Financial Accounting Standards Board regulations. At a recent meeting of FASB's Emerging Issues Task Force, regulators discussed a number of issues, some of which were left unresolved and open to the public for comment. Here are three proposed changes to FASB regulations that relate to not-for-profit companies.

Issue No. 11-A: "Parent's Accounting for the Cumulative Translation Adjustment upon the Sale or Transfer of a Group of Assets That Is a Nonprofit Activity or a Business within a Consolidated Foreign Entity"

According to FASB, "the issue is about when and how a parent [company] should recognize a portion of the CTA [cumulative translation adjustment] in earnings upon the loss of a controlling financial interest in a group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a consolidated foreign entity." FASB is seeking comment on a proposal that, upon sale of the nonprofit, the parent company should report a portion of the cumulative translation adjustment in its earnings.

Issue No. 12-A: "Not-for-Profit Entities: Classification of the Sale of Donated Securities in the Statement of Cash Flows"

Some donations made to not-for-profit companies come in the form of securities, like stocks or bonds, which organizations typically sell for cash almost immediately upon receipt. Currently, some not-for-profit companies report those sales as part of their cash flow, while others do not. FASB would like not-for-profits to classify those sales as operating cash flow, unless the donor specifically indicated the gift should be used for a long-term purpose, such as the acquisition of certain assets or to establish an endowment, in which case the sales should be reported as financing cash flows.

Issue No. 12-B: "Not-for-Profit Entities: Services Received from Employees of an Affiliated Entity"

Not-for-profits are allowed to receive funding and support to pay personnel who can be assigned to work for other affiliated not-for-profits. There are a variety of guidances that cover certain service donations and contributions and how they should be classified, but reporting practices are different from organization to organization. NASB is looking to clarify whether the personnel costs incurred by an organization on behalf of its affiliate should count as contributed services, and if not, what the best way to classify those costs might be.

Here's a little more on non-profit accounting.

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