New FASB Standard Eliminates Fair Value of Financial Instruments Disclosures for NFPs

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The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments-Overall (Subtopic 825-10 Recognition and Measurement of Financial Assets and Financial Liabilities).

Although broad in scope in addressing certain aspects of recognition, measurement and presentation of financial instruments, the new ASU is not expected to have a significant impact on not-for-profit (NFP) entities, except for one very significant issue: all NFPs, including NFPs with publicly traded conduit debt, NFPs with more than $100 million in assets and NFPs with derivatives, are immediately no longer required to provide fair value disclosure of financial instruments that are measured and carried at cost or amortized cost on their Statements of Financial Position, which was required by FASB ASC 825-10-50. For example, an NFP is no longer required to provide disclosure about the fair value of its long-term debt.

There is no change to the disclosure requirements for assets and liabilities reported at fair value as a result of this ASU. NFPs will still be required to provide the table that identifies the levels for their fair value measurements, as well as the disclosures in FASB ASC 820-10-50 that accompany that table.

Although ASU 2016-01 is effective for NFPs for fiscal years beginning after December 15, 2018, and can be early implemented only for fiscal years beginning after December 15, 2017, the ASU permits NFPs and all other entities that are not “public business entities” (note, NFPs are scoped out of the definition of “public business entities”) to elect not to disclose the fair value of financial instruments that are reported at cost or amortized cost in all financial statements that have not yet been made available for issuance.

For those NFPs that were previously required to provide the fair value of financial instruments for assets and liabilities that are reported at cost or amortized costs, obtaining the information of the fair value of financial instruments has sometimes been challenging. The immediate elimination of the previously required disclosures will most likely be viewed as positive and welcome change to what many felt was disclosure overload.

To read ASU No. 2016-01, Financial Instruments-Overall, in its entirety visit the FASB website.

As a leader in serving the NFP industry, Sikich is committed to keeping you informed and up-to-date on matters affecting you. If you have any questions or need more information on these or any other NFP issues, please contact one of our NFP executives.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


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