FASB Exposure Draft Affects Financial Statements of Healthcare and Not-for-Profit Organizations

impact (150x100)The Financial Accounting Standards Board (FASB) recently issued an exposure draft titled Not-for-Profit Entities (Topic 958) and Healthcare Entities (Topic 954) Presentation of Financial Statements of Not-for-Profit Entities. While this exposure draft involves only proposed standards, organizations may want to consider the potential impact on their financial statements and, if appropriate, respond to FASB with feedback within the comment period. Comments on this exposure draft are due August 20, 2015.

This exposure draft is intended to improve the current net asset classifications presented in the financial statements of not-for-profit entities and applicable healthcare entities, as well as provide additional information to users about liquidity, financial performance, and cash flows.

Under the proposed standard, the classification of net assets would be reduced from the currently required three classifications to two classifications: net assets with donor restrictions and net assets without donor restrictions. The statement of activities will report the changes in only those two net asset classifications.

The statement of activities also would include two required captions related to operating activities associated with the changes in net assets without donor restrictions. These subtotals would reflect operating activities for the period and distinguish those from other activities (those not directed at carrying out the not-for-profit’s mission). These other activities may not necessarily be consistent with the current classification of items in operating income or loss.

The exposure draft would require that the cash flow statement be prepared using the direct method of reporting. The proposed standard also varies from current guidance with other substantial differences, such as classification of purchases and sales of long-lived assets as an operating, rather than an investing, cash flow. Payments of interest would be financing cash flows rather than operating cash flows, as under current guidance. Cash flows from receipts of interest and dividends on loans and investments would be shown as investing cash flows rather than operating cash flows. The exposure draft also suggests other modifications to the classification of cash flows.

Finally, FASB is proposing additional, enhanced disclosures with respect to the financial statements, including qualitative and quantitative information about period-end balances of board-designated net assets without donor restrictions. Information regarding management of liquidity and other quantitative information as of the reporting date would also be required.

While this is still an exposure draft, its proposed changes should be considered by all affected organizations. A final standard is currently expected in the second quarter of 2016.

If you have any additional questions, contact the expert listed below at PYA, (800) 270-9629.

Doug Arnold

Doug Arnold


Related Posts
PYA has added 2018 reimbursement updates to a white paper that provides valuation guidance to hospitals considering telemedicine arrangements for providing much-needed healthcare services at lower costs. As patient demand...
Read More

PYA White Paper “An Introduction to Valuing Telemedicine” Gets 2018 Updates

Compliance Today magazine recently published an article, “Regulatory Compliance: Physician Needs Assessments Are an Integral Step,” authored by PYA Principal Tynan O. Kugler. It highlights the critical role physician needs...
Read More

Regulatory Compliance: Physician Needs Assessments Are an Integral Step

Medicare cards are getting a much-needed facelift.  The Centers for Medicare & Medicaid Services has announced its intention to remove Social Security numbers from the cards in an effort to...
Read More
Medicare card scam

New Medicare Cards in the Mail—Don’t Fall Prey to Scammers

PYA has released an updated white paper offering a succinct list of changes and updated instructions for providing and billing Medicare for chronic care management. PYA, a national professional services...
Read More

Updated White Paper Addresses Changes in Providing and Billing Medicare for Chronic Care Management Services

PYA Consulting Manager Kathryn Culver was recently published in Becker’s Hospital Review. Culver’s article, “Trump’s Tax Act: What It Means for a Physician’s Bottom Line,” examines the impact the Qualified...
Read More

Trump’s Tax Act: What It Means for a Physician’s Bottom Line

The Association of Community Cancer Centers will hold its 44th Annual Meeting & Cancer Center Business Summit (CCBS) March 14-16, 2018, at the Renaissance Washington, DC, Downtown Hotel. PYA will...
Read More

PYA Joins Convergence of Thought Leaders at Cancer Center Business Summit

Leaders in the long-term care industry will convene in New Orleans, LA, to participate in the American Health Lawyers Association (AHLA) Long-Term Care and the Law program February 28-March 2,...
Read More

Long-Term Care Compliance on AHLA Program Agenda

Most Americans are now aware that new tax reform legislation, titled the 2017 Tax Cuts and Jobs Act, was signed into law late last year. There has been significant news...
Read More

Excess Employee Compensation Under the New Tax Reform Law: Will Your Tax-Exempt Organization Be Affected?

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop