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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Serie: AICPA
- Sprache: Englisch
Featuring the latest ASUs through the date of publication, this broad-ranging book covers FASB accounting and reporting developments that apply to all companies. Emphasizing financial statement disclosures in addition to accounting methods, the author presents implementation guidelines and disclosure illustrations from actual financial statements. Key topics include: * The financial reporting environment * Summary of recent FASB releases * Accounting and reporting topics common to most entities, including the following: * Recognizing revenue under the new standard * The new leasing model * Fair value accounting * Inventory * Property, plant, and equipment - including capitalized interest and nonmonetary transactions * Accounting for debt * Accounting for income taxes * Financial statement presentation and notes disclosures * The financial statements
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Seitenzahl: 498
Veröffentlichungsjahr: 2020
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Table of Contents
Cover
Chapter 1: The Financial Reporting Environment
Practice questions
Chapter 2: Summary of Recent Accounting Standards Updates
Part 1: Guidance effective in 2018
Part 2: Guidance effective in 2019 and beyond
Notes
Chapter 3: Accounting Guidance on the Horizon
Practice question
Notes
Chapter 4: Recognizing Revenue Under the New Standard: Core Principles and Resources
Practice questions
Note
Chapter 5: The New Leasing Model
Notes
Chapter 6: Fair Value Accounting
Chapter 7: Inventory
Practice question
Note
Chapter 8: Property, Plant, and Equipment — Including Capitalized Interest and Nonmonetary Transactions
Practice question
Chapter 9: Accounting for Debt
Chapter 10: Accounting for Income Taxes
Measuring deferred tax assets and liabilities
Intraperiod tax allocation
Disclosure requirements
Chapter 11: Financial Statement Presentation and Notes Disclosures
Chapter 12: The Financial Statements
Accounting and Auditing Glossary
Index
Solutions
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
End User License Agreement
List of Illustrations
Chapter 5
Figure 5-1
Guide
Cover
Table of Contents
Begin Reading
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COMMON U.S. GAAP ISSUES FACING ACCOUNTANTS
Notice to readers
Common U.S. GAAP Issues Facing Accountants is intended solely for use in continuing professional education and not as a reference. It does not represent an official position of the American Institute of Certified Public Accountants, and it is distributed with the understanding that the author and publisher are not rendering legal, accounting, or other professional services in the publication. This course is intended to be an overview of the topics discussed within, and the author has made every attempt to verify the completeness and accuracy of the information herein. However, neither the author nor publisher can guarantee the applicability of the information found herein. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
You can qualify to earn free CPE through our pilot testing program.
If interested, please visit https://aicpacompliance.polldaddy.com/s/pilot-testing-survey.
© 2019 Association of International Certified Professional Accountants, Inc. All rights reserved.
For information about the procedure for requesting permission to make copies of any part of this work, please email [email protected] with your request. Otherwise, requests should be written and mailed to Permissions Department, 220 Leigh Farm Road, Durham, NC 27707-8110 USA.
ISBN 978-1-119-74340-8 (Paper)
ISBN 978-1-119-74341-5 (ePDF)
ISBN 978-1-119-74337-8 (ePub)
ISBN 978-1-119-74343-9 (oBook)
Course Code: 746620
FRU GS-0419-0A
Revised: May 2019
Chapter 2Summary of Recent Accounting Standards Updates
Learning objectives
Identify key aspects of FASB Accounting Standards Updates (ASUs) effective in 2018.
Identify key aspects of ASUs effective in 2019 and beyond.
Identify key aspects of ASUs specific to private companies.
Overview
This chapter is organized in the following two parts:
Part 1: ASUs effective in 2018.
Part 2: ASUs effective in 2019 and beyond.
Part 1: Guidance effective in 2018
ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
Overview
This ASU is part of FASB’s simplification project to reduce the unnecessary complications of determining the current and noncurrent portions of deferred taxes. The ASU addresses feedback from stakeholders about the costs and benefits of current requirements. Specifically, the separation of deferred income tax liabilities and assets into current and noncurrent components offers limited benefit to users of financial statements because the classification does not generally align with the time period in which the recognized deferred tax amounts are expected to be recovered or settled.
Scope
This ASU is applicable to all entities who present a classified balance sheet (statement of financial position).
Requirements
This ASU, when effective, will require that an entity within the scope present deferred tax assets or deferred tax liabilities only as noncurrent. The requirement to offset deferred tax assets and liabilities is not affected by the issuance of this ASU.
Effective dates
Application details include the following:
For public business entities: Effective for fiscal periods beginning after December 15, 2016, including interim periods within those periods.
For all other entities: Effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018.
Early application is permitted for all entities as of the beginning of an interim or annual period.
Applied prospectively or retrospectively for all periods presented, and disclosure of the change is needed in the first period in which the change is adopted. If retrospectively adopted, quantitative information about the effects of the change in accounting on prior periods is needed.
ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
Overview
This ASU provides guidance for both the initial and subsequent recognition of financial assets and financial liabilities, as well as presentation and disclosure issues. The objective of the ASU is to provide a more enhanced or robust reporting model for financial instruments.
Scope
Applicable to all entities that hold financial assets or financial liabilities.
Requirements
The ASU segregates the accounting for debt and equity securities by modifying FASB ASC 320, Investments — Debt and Equity Securities, to include guidance related only to debt securities. The ASU has created a new FASB ASC topic, FASB ASC 321, Investments — Equity Securities, to provide guidance for equity securities.
New FASB ASC Topic 321
Under existing GAAP, a reporting entity determines whether marketable equity securities are classified as “trading” securities or “available-for-sale” securities. Both classifications required measurement at fair value, with differences in how the unrealized gain or loss was presented. Trading unrealized gains and losses are included in net income, although unrealized gains and losses from available-for-sale securities are included in other comprehensive income.
This ASU eliminates the distinction between trading and available-for-sale securities. All equity investments (with exceptions noted as follows) will now be measured at fair value with the unrealized gain or loss recognized in net income.
Equity investments that meet the following criteria are not subject to the provisions of this update:
Equity investments accounted for under the equity method
Equity investments that result in the consolidation of the investee
Equity securities without readily determinable fair values (ASC 321-10-35-2)
An entity may elect to measure an equity security without a readily determinable fair value by measuring such security at cost less impairment. This measurement is further supplemented by requiring an adjustment (plus or minus) resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.
The election to treat such equity securities should remain in effect until such time as the security no longer qualifies to be accounted for within this section. The entity should reassess at each reporting period whether the equity investment continues to qualify as an equity security without a readily determinable fair value.
Impairment of equity securities without readily determinable fair values (ASC 321-10-35-3)
If an entity holds an equity security without a readily determinable fair value (that does not qualify for the practical expedient to estimate fair value under ASC 820-10-35-59), a qualitative assessment is now available under ASC 321-10-35-3. The equity security should be written down to its fair value if the qualitative assessment indicates the security is impaired. The following factors should be considered in the qualitative assessment:
A significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee
A significant adverse change in the regulatory, economic, or technological environment of the investee
A significant adverse change in the general market conditions of either the geographical area or the industry in which the investee operates
A bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of the investment
Factors that raise significant concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants
The preceding list of items is not considered to be all-inclusive. Any other factors that an entity would consider in determining if impairment exists should be considered.
Investments–debt securities (ASC 320)
Initial and subsequent measurement
Unlike the changes to equity securities, investments in debt securities will continue to be classified into the following three categories described in existing GAAP:
Trading securities
Available-for-sale securities
Held-to-maturity securities
The initial measurement and subsequent measurement for debt securities will remain unchanged.
Disclosure of certain information related to financial instruments measured at amortized cost
The following changes to disclosures are included in the ASU:
Entities that are not public business entities that measure debt securities at amortized cost are no longer required to disclose the fair value of such financial instruments.
Public business entities are no longer required to disclose the methods and significant assumptions used to estimate fair value for financial instruments that are measured at amortized cost on the balance sheet.
Public entities are required to use the exit price notion when measuring the fair value.
Presentation issues for comprehensive income
Certain financial liabilities that elect to be accounted for under the fair value option in ASC 825-10-25-1 will now be required to present separately in other comprehensive income, the portion of the total change in the fair value of the liability resulting from a change in the instrument-specific credit risk.
Presentation and disclosure issues — balance sheet
An entity must present separately on the face of the balance sheet or in the notes to the financial statements the following information:
Financial assets by measurement category
Trading
Available-for-sale
Held to maturity
Financial assets by form of financial asset
Securities
Loans
Receivables
Financial liabilities by measurement category
Financial liabilities by form of financial liability
Consideration of a valuation allowance for a deferred tax asset
The ASU clarifies the need for an entity to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.
Effective dates
Public business entities: Effective for fiscal years beginning after December 15, 2017, including interim periods within those years.
All other entities, including not-for-profit entities and employee benefit plans within the scope of FASB ASC 960–985: Effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.
There is a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption.
The ASU is applied prospectively to equity securities without readily determinable fair values that exist as of the date of the adoption.
Disclosure example1
Many entities, including large public companies such as Microsoft Corporation, own debt and equity investments. The following is an excerpt from Microsoft Corporation’s accounting policies as reported in their first quarter (10-Q) September 30, 2018 financial statements addressing the adoption of the guidance in this ASU:
Financial Instruments
Investments
We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.
Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in fair value, excluding other-than-temporary impairments, are recorded in other comprehensive income (“OCI”) [emphasis added]. Debt investments are impaired when a decline in fair value is judged to be other-than-temporary. Fair value is calculated based on publicly available market information or other estimates determined by management. We employ a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the duration and extent to which the fair value is less than cost. We also evaluate whether we have plans to sell the security or it is more likely than not that we will be required to sell the security before recovery. In addition, we consider specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in other income (expense), net and a new cost basis in the investment is established.
Equity investments with readily determinable fair values are measured at fair value. Equity investments without readily determinable fair values are measured using the equity method, or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative) [emphasis added]. We perform a qualitative assessment on a quarterly basis and recognize impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. Changes in value are recorded in other income (expense), net [emphasis added].
ASU No. 2016-04, Liabilities — Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products (a consensus of the Emerging Issues Task Force)
Issue date
March 2016
Who is affected
This ASU affects entities that issue certain prepaid stored-value products, whether in physical or digital form, such as gift cards that customers may redeem with merchants accepting such products within a certain network, prepaid telecommunication (phone) cards, and travelers’ checks.
Background
This ASU seeks to minimize current and future diversity in practice when an entity derecognizes prepaid stored-value product liability.
Today there is diversity in practice in how entities account for prepaid stored-value product liabilities, with some entities viewing them as financial liabilities and others viewing them as nonfinancial liabilities. FASB ASC 405-20, Liabilities — Extinguishments of Liabilities, includes derecognition guidance for both financial and nonfinancial liabilities. But entities use diverse methodologies for recognizing “breakage” (that is, the portion of the dollar value of prepaid stored-value products that goes unredeemed); and no such guidance currently exists in the subtopic.
Discussion of significant changes
This ASU aligns FASB ASC 405 with the authoritative breakage guidance in FASB ASC 606, Revenue from Contracts with Customers, by allowing entities to follow the guidance in FASB ASC 606 to recognize breakage on prepaid stored-value products. An excerpt from the pending guidance in FASB ASC 405 follows:
If an entity expects to be entitled to a breakage amount for a liability resulting from the sale of a prepaid stored-value product in the scope of paragraph 405-20-40-3, the entity shall derecognize the amount related to the expected breakage in proportion to the pattern of rights expected to be exercised by the product holder only to the extent that it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. If an entity does not expect to be entitled to a breakage amount for prepaid stored-value products in the scope of paragraph 405-20-40-3, the entity shall derecognize the amount related to breakage when the likelihood of the product holder exercising its remaining rights becomes remote. At the end of each period, an entity shall update the estimated breakage amount to represent faithfully the circumstances present at the end of the period and the changes in circumstances during the period. Changes to an entity’s estimated breakage amount shall be accounted for as a change in accounting estimate in accordance with paragraphs 250-10-45-17 through 45-20.
This ASU provides a narrow-scope exception per the preceding but does not apply to
products that can be redeemed only for cash.
products subject to escheatment laws.
products associated with customer loyalty programs.
products attached to a segregated bank account.
Effective date and transition requirements
Public business entities, certain not-for-profit entities, and certain employee benefit plans
Effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods.
All other entities
Effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.
Early application
Early application is permitted, including adoption in an interim period.
ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the Emerging Issues Task Force)
Issue date
March 2016
Background
Parties to a derivative investment may change over time for various reasons, including mergers or regulatory requirements, through “novation” (meaning, to replace one party to a derivative instrument with another party). This ASU clarifies whether novation in a derivative instrument that has been designated a hedging instrument under Topic 815 terminates the hedging relationship, requiring the entity to de-designate the hedging relationship and cease hedge accounting. This ASU seeks to mitigate diversity in practice.
Who is affected
This ASU affects entities that experience a change in counterparty to a derivative instrument that has been designated as a hedging instrument under Topic 815.
Main provisions
If the only change to a hedging instrument is novation, this ASU provides that de-designation of that hedging relationship is not required, provided that all other hedge accounting criteria continue to be met. This would include criteria in FASB ASC 815-20-35-14 through 35-18.
Discussion of changes
Current GAAP is limited and not sufficiently clear about whether novation affects the ongoing hedging instrument status. This ASU clarifies that novation does not terminate the hedge relationship and that de-designation is not required.
Effective date and transition requirements
Public business entities
Effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.
All other entities
Effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.
Early application
An entity may apply this ASU on either a prospective basis or a modified retrospective basis subject to certain requirements.
ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force)
Issue date
March 2016
Background
This ASU seeks to address certain questions about the “four-step decision sequence” provided as implementation guidance by the Derivatives Implementation Group (DIG), and how the implementation guidance interacts with the original guidance in FASB ASC 815, Derivatives and Hedging, for assessing embedded contingent call (or put) options in debt instruments. Currently, entities use two different approaches, which may lead to different conclusions about whether the embedded call (or put) option is “clearly and closely related” to its debt host, and, thus, should be bifurcated and accounted for separately as derivatives. This ASU seeks to resolve the diversity in practice.
Who is affected
This ASU affects issuers of, or investors in, debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (or put) options.
Main provisions
This ASU clarifies that entities should apply the four-step decision sequence in determining whether contingent call (or put) options are clearly and closely related to their debt hosts. Guidance requiring the contingent call (or put) options to be indexed to interest rates or credit risks has been removed and will no longer preclude those instruments from meeting the clearly and closely related criterion.
Effective date and transition requirements
Public business entities
Effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.
All other entities
Effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.
Early application
Early application is permitted, including adoption in an interim period. If an entity early adopts this ASU in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
Apply on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which this ASU is effective. (This ASU describes additional transition guidance.)
ASU No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
Issue date
March 2016
Background
As part of FASB’s simplification initiative, the board identified the issues in this ASU through outreach, research by the Private Company Council, and the August 2014 Post-Implementation Review Report on FASB Statements No 123(F), Share-Based Payment.
Who is affected
This ASU affects all entities that issue share-based payment awards to their employees. Some of the simplified guidance applies solely to nonpublic entities.
Main provisions and significant changes
This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows. Nonpublic entities may apply two practical expedients to estimate the expected term of an award and make a one-time election to switch from fair value measurement to intrinsic value measurement for liability-classified awards.
Accounting for income taxes
Recognize all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) as income tax expense or benefit in the income statement.
Change: The excess benefits are no longer recognized in additional paid-in capital and tax deficiencies may no longer offset excess tax benefits.
Treat the tax effects of exercised or vested awards as discrete items in the reporting period in which they occur.
Recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period.
Change: No longer required to defer excess tax benefits until the deduction reduces taxes payable.
Classify excess tax benefits (along with other income tax flows) in the statement of cash flows as an operating activity.
Change: No longer required to separate these flows from other income tax cash flows and classify as a financing activity.
Forfeitures
An entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur.
Change: An entity may continue to estimate the number of awards that will vest or account for forfeitures as they occur.
Statutory withholding requirements
The threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions.
Change: Under current GAAP the threshold for qualification as equity is that an entity could not partially settle an award in cash in excess of the employer’s minimum statutory withholding requirements.
Employee taxes paid
When directly withholding shares for tax withholding purposes, classify cash paid by an employer as a financing activity cash in the Statement of Cash Flows.
Change: Current GAAP has no guidance.
Practical expedient — nonpublic entities only
Make an accounting policy election to estimate the expected term for all awards with performance or service conditions that meet certain conditions.
Make a one-time accounting policy election to switch from measuring all liability-classified awards at fair value to intrinsic value.
Changes: Current GAAP requires entities to estimate the period of time that an option will be outstanding. Nonpublic entities currently have the option at initial adoption of Topic 718, Compensation — Stock Compensation, to measure liability-classified awards at intrinsic value, although some nonpublic entities were apparently unaware of the option.
Effective date and transition requirements
Public business entities
Effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.
All other entities
Effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.
Early application
Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt the entire ASU in the same period.
ASU No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities
Issue date
August 2016
Background and overview
The last time financial statement presentation for NFP entities changed was in 1933. The intent of this ASU is to provide NFPs with more relevant information about their resources, along with the changes in those resources, by improving financial statement presentation and disclosures. In this way, more relevant information will be available to donors, grantors, creditors, and other financial statement users by making the financial statements easier to understand.
Scope
This ASU applies to NFP entities that are subject to the financial statements and note requirements described in FASB ASC 958, Not-for-Profit Entities.
Significant changes to NFP presentation and disclosures
This 270-page ASU details significant change to the financial statement presentation of NFPs. Broad highlights of these significant changes are as follows:
Reduces the number of net asset classes from three to two. The new classes will be net assets with donor restrictions and net assets without donor restrictions.
Requires reporting of the underwater amounts of donor-restricted endowment funds in net assets with donor restrictions and enhances disclosures about underwater endowments.
Continues to allow preparers to choose between the direct method and indirect method for presenting operating cash flows, eliminating the requirement for those who use the direct method to perform reconciliation with the indirect method.
Requires that the NFP provide in the notes:
Qualitative information on how it manages its liquid available resources and liquidity risks, and
Quantitative information that communicates the availability of the NFP’s financial assets at the balance sheet date to meet cash needs for general expenditures within one year. This requirement may be presented on the face of the financial statement, in the notes, or both.
Requires reporting of expenses by function and nature, as well as an analysis of expenses by both function and nature.
It is suggested that you refer directly to the guidance in the ASU, including the implementation guidance contained directly in the standard, and consider the several NFP resources described following.
Effective date and transition
The ASU is effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018.
Early application is permitted.
Applied on a retrospectively in the year of adoption. If the NFP presents comparative financial statements, they have an option to omit some select information for any period(s) presented before the period of adoption.
Keep in mind that the ASU includes transitional guidance for the year of adoption, which includes specific disclosures.
Resources
The AICPA has a dedicated section for NFPs, containing articles and tools relating to this ASU as well as other broader NFP considerations.
Those interested in or involved with NFPs may want to consider joining the AICPA Not-for-Profit Section. This section supports NFPs and the professionals who serve NFPs. The Section provides useful tools and resources that facilitate compliance with standards and regulations, promotes excellence in the NFP sector, and serve as a hub for peer-to-peer learning and information sharing. The section covers NFP requirements in Accounting & Financial Reporting, Tax Compliance, Governance, and Assurance. Here is a link to the AICPA’s not-for-profit interest area, https://www.aicpa.org/interestareas/notforprofit.html.
Presentation example from pending content in FASB ASC 958-205-55-9
The following illustrates a statement of financial position for an NFP reflecting two net asset categories as required in the guidance of this ASU:
Not-for-Profit Entity A Statements of Financial Position June 30, 20X1 and 20X0 [in thousands)
Assets:
20X1
20X0
Cash and cash equivalents
$4,575
$4,960
Accounts and interest receivable
2,130
1,670
Inventories and prepaid expenses
610
1,000
Contributions receivable
3,025
2,700
Short-term investments
1,400
1,000
Assets restricted to investment in land, buildings, and equipment
5,210
4,560
Land, buildings, and equipment
61,700
63,590
Long-term investments
218,070
203,500
Total assets
$296,720
$282,980
Liabilities and net assets:
Liabilities:
Accounts payable
$ 2,570
$ 1,050
Refundable advance
650
Grants payable
875
1,300
Notes payable
1,140
Annuity trust obligations
1,685
1,700
Long-term debt
5,500
6,500
Total liabilities
10,630
12,340
Net assets:
Without donor restrictions (Note DD)
92,600
84,570
With donor restrictions (Note B)
193,490
186,070
Total net assets
286,090
270,640
Total liabilities and net assets
$296,720
$282,980
Note: See paragraph 958-205-55-21 for the notes to financial statements.
Disclosure example: Pending content from FASB ASC 958-205-55-21
The following illustrates an example of a liquidity note in the initial year the guidance in the ASU is adopted. Only a single year presentation is required, even if the entity issues comparative financial statements. In subsequent years comparative presentation is required assuming the NFP issues comparative financial statements.
Note G
The following reflects Not-for-Profit Entity A’s financial assets as of the balance sheet date, reduced by amounts not available for general use because of contractual or donor-imposed restrictions within one year of the balance sheet date. Amounts not available include amounts set aside for long-term investing in the quasi-endowment that could be drawn upon if the governing board approves that action. However, amounts already appropriated from either the donor-restricted endowment or quasi-endowment for general expenditure within one year of the balance sheet date has not been subtracted as unavailable.
Financial assets, at year-end
$ 234,410
Less those unavailable for general expenditures within one year, due to: Contractual or donor-imposed restrictions:
Restricted by donor with time or purpose restrictions
(11,940)
Subject to appropriation and satisfaction of donor restrictions
(174,700)
Investments held in annuity trust
(4,500)
Board designations:
Quasi-endowment fund, primarily for long-term investing
(36,600)
Amounts set aside for liquidity reserve
(1,300)
Financial assets available to meet cash needs for general expenditures within one year
$ 5,370
Not-for-Profit Entity A is substantially supported by restricted contributions. Because a donor’s restriction requires resources to be used in a particular manner or in a future period, Not-for-Profit Entity A must maintain sufficient resources to meet those responsibilities to its donors. Thus, financial assets may not be available for general expenditure within one year. As part of Not-for-Profit Entity A’s liquidity management, it has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due. In addition, Not-for-Profit Entity A invests cash in excess of daily requirements in short-term investments. Occasionally, the board designates a portion of any operating surplus to its liquidity reserve, which was $1,300 as of June 30, 20X1. There is a fund established by the governing board that may be drawn upon in the event of financial distress or an immediate liquidity need resulting from events outside the typical life cycle of converting financial assets to cash or settling financial liabilities. In the event of an unanticipated liquidity need, Not-for-Profit Entity A also could draw upon $10,000 of available lines of credit (as further discussed in Note XX) or its quasi-endowment fund.
Helpful tips for implementing this ASU
Consider structure and resources carefully — How does the NFP capture data? Knowing this will assist in gathering information in order to properly disclose the function and nature of expenses.
Examine the structure of the NFP’s financial statements and information systems — this will assist in conforming to the new reporting new requirements.
Resource and Implementation needs — Some NFPs are very complex, having multiple lines of business or wholly owned for-profits, thereby creating complicated presentations, although smaller NFPs have less complex transactions and reporting requirements. Determine as soon as possible the type of resources you will need in order to effectively implement this ASU.
ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)
Issue date
August 2016
Background
This ASU was issued to reduce the existing diversity in practice relating to eight specific cash flow issues. These issues pertain to the presentation and classification of certain cash receipts and cash payments in the statement of cash flow, along with some other topics.
Scope
The amendments in this ASU are applicable to all entities required to present a statement of cash flows under FASB ASC 230, Statement of Cash Flows, including not-for-profit entities.
