Nonprofit & Government Times Q1 2020

• a new liquidity and availability of resources footnote; • a requirement to disclose the amounts and purposes of governing board designations that result in self- imposed limits on the use of resources at the end of their reporting period; • an enhanced qualitative description of the method(s) used to allocate costs among program and support functions; and • additional disclosures for endowment funds that are under water. DISCLOSURES REQUIRED BY ASU 2018-08 CLARIFYING THE SCOPE AND THE ACCOUNTING GUIDANCE FOR CONTRIBUTIONS RECEIVED AND MADE FASB issued this ASU because of difficulty and diversity in practice among not-for-profits with the following: • characterizing grants and similar contracts with government agencies and others as reciprocal trans- actions (exchanges) or nonreciprocal transactions (contributions); or for • distinguishing between conditional and unconditional contributions. A grant can either be an exchange transaction or a contribution, depending on the grant agreement. If a grantor (government or foundation) is not receiving direct commensurate value for the funds provided/ promised, then the grant is a contribution and this ASU is applicable regarding how the revenue is recog- nized. If the grant document has a barrier to overcome before the revenue can be recognized and a right of return/release from obligation, it is considered a condi- tional contribution until the conditions are met. If the grantor is receiving direct commensurate value for the funds provided/promised, then the grant is an exchange transaction and ASU 2014-09 Revenue from Contracts with Customers (ASC Topic 606) is applicable regarding how the revenue is recognized. (See below.) Conditional government and foundation grants will result in an additional footnote disclosure. For conditional promises to give, an organization needs to disclose the following:

ADDITIONAL DISCLOSURES FOR NONPROFIT ORGANIZATIONS

Recently, generally accepted accounting principles (GAAP) have become more complex, requiring additional and more elaborate disclosures, especially for nonprofit organizations. It is not uncommon to have from 10 to more than 20 pages of footnote disclosures for a nonprofit organization, and the recently issued Accounting Standards Updates (ASU) issued by the FASB will signifi- cantly increase the footnote disclosures for nonprofits. Recent ASUs that require significant additional disclosures for nonprofit organizations are as follows: • ASU 2016-14 Not-for-Profit Entities (Accounting Standards Codification (ASC) Topic 958)—Was effective for fiscal years beginning after December 15, 2017 (December 31, 2018 year-ends) • ASU 2018-08 Clarifying the Scope and the Account- ing Guidance for Contributions Received and Made — Effective for fiscal years beginning after December 15, 2018 (December 31, 2019 year-ends) • ASU 2014-09 Revenue from Contracts with Customers (ASC Topic 606) —Effective for fiscal years beginning after December 15, 2018 (December 31, 2019 year-ends) • ASU 2016-02 Leases (ASC Topic 842)—Will be effective for fiscal years beginning after December 15, 2020 (December 31, 2021 year-ends) • FASB is working on a project regarding gifts-in-kind (donated nonfinancial assets) expected to be issued in the first quarter of 2020. DISCLOSURES REQUIRED BY ASU 2016-14 NOT-FOR-PROFIT ENTITIES (ASC TOPIC 958) ASU 2016-14 Not-for-Profit Entities was issued to make improvements for the net asset classifications, to provide information regarding liquidity and availability of resources, and to remove inconsistencies in financial reporting for better comparability among nonprofit organizations. It provides the following: Proposed Gifts-in-Kind Exposure Draft with an addi- tional footnote disclosure:

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