The Financial Accounting Standards Board (FASB) voted Wednesday, January 29 to reorganize its future agenda in order to focus more closely on the issues most important to FASB stakeholders. This comes as the Board anticipates completion of its remaining four convergence projects for harmonizing U.S. GAAP with International Financial Reporting Standards (IFRS).
The reorganization of the FASB agenda was guided by the results of a survey conducted by the FASB last year of more than 100 members of various FASB advisory groups and other interested parties on future priorities for standard-setting. The group surveyed consisted of a number of different stakeholders that included preparers, investors, auditors, academics, industry organizations and other users and readers of financial statements.
How might the reorganization impact nonprofit organizations? There are several key areas to monitor over the coming months, including:
- The Government Assistance Project : The FASB Board voted to add this project to its technical agenda as a way to develop guidance for disclosure requirements related to various types of government assistance. Presently, the FASB’s Accounting Standard Codification lacks specific guidance on accounting for and disclosure of government assistance, which some believe results in significant shortcomings in these organizations’ financial statements. There currently exists guidance promulgated by International Accounting Standards Board under IFRS 20, Accounting for Government Grants and Disclosure of Government Assistance, and since convergence with IFRS is a fundamental goal of the FASB, we
can expect the Board to investigate how those standards would impact any guidance issued in this regard.
- Project Removal: The FASB Board also voted to remove the Not-for-Profit Financial Reporting: Other Financial Communications project from its research agenda. In this project, the FASB was considering whether adding a Management Discussion and Analysis section to nonprofit financials would be useful. While the Board discussed a number of factors underlying the basis of their decision to remove this project, the key factors revolved around whether the final recommendations would be voluntary rather than mandatory. There was also a general cautiousness around tackling a project beyond the scope of traditional standard-setting activities, as it involves reporting outside of the basic financial statements.
- Private Company Council: During the meeting, the Board also decided that the Private Company Council (a group of stakeholders that works with the FASB to determine adjustments in accounting standards for privately held companies) should consider doing pre-agenda work on phase two of the “Definition of a Nonpublic Entity” project. This may impact nonprofits that are required to include certain financial statement disclosures that are normally reserved for public companies by virtue of the fact that they hold public debt instruments, which make them, by definition, “public” entities.
As the FASB’s agenda reorganization begins to take effect over the coming months, stay tuned to the Nonprofit Standard for the most up-to-date insights and analysis.