On December 11, 2015, the Financial Accounting Standards Board (FASB) discussed the following issues in Phase 1 of redeliberations of the proposed FASB Accounting Standards Update, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities (the proposed Update):
The Board decided not to require not-for-profit (NFP) entities to use the direct method of presenting operating cash flows, but instead to continue to allow them to use either the direct method or indirect method. Further, the Board decided to no longer require the indirect reconciliation if an NFP chooses to use the direct method.
The Board made decisions on the following issues:
1. Requirement of two classes of net assets
2. Disclosure of amounts and purposes of board-designated net assets
3. Classification and disclosure of underwater endowments
4. Requirement of placed-in-service approach and elimination of over-time approach for expirations of restrictions to acquire or construct long-lived assets
The Board discussed the proposal for providing qualitative and quantitative information useful for assessing liquidity and potential alternatives. The Board directed the staff to explore an approach that would require, like the proposal, qualitative information about how the NFP manages its liquidity and liquidity risks, but provide alternative ways of presenting quantitative information. This approach would emphasize information about assets that are liquid and available at the balance sheet date.
Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
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