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 is pleased to announce the promotions of Michael Ramey, Matt Stuart, and Jeff Pate to the level of Equity Principal. PYA has announced the promotion of Senior Manager Michael...
Read More

PYA Announces Three New Equity Principals

PYA Principal Bob Paskowski is charting risk-contracting territory in an article published in the December issue of hfm Magazine, a publication of the Healthcare Financial Management Association (HFMA). Included in...
Read More

Charting Success: Key Risk-Contracting Provisions

PYA Healthcare Consulting Manager Kathryn Culver authored an article, “Changing Landscape for Health Lawyers,” which was recently published in Connections magazine, a monthly publication of the American Health Lawyers Association...
Read More

“Changing Landscape for Health Lawyers”

In today’s business environment, cloud computing arrangements play a key role in the day-to-day operations of companies large and small. The Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU)...
Read More

Clearing Up Cloud Computing Accounting

A recent article in DecisionHealth’s Part B News provides a glimpse into the future of charting patient encounters and the changes that will occur regarding Evaluation and Management (E/M) documentation....
Read More

PYA Thought Leader Quoted in Article Highlighting Potential Changes to E/M Documentation and Reporting

PYA made significant contributions to the recently released “BVR/AHLA Guide to Valuing Physician Compensation and Healthcare Service Arrangements,” which serves as the definitive guide for healthcare organizations seeking to understand...
Read More

PYA Lends Expertise in Premier Industry Publication for Valuing Physician Compensation and Healthcare Service Arrangements

An on-demand webinar, presented by Mike Shamblin, CPA, and brought to you by PYA, helps lay the foundation for the new revenue recognition standard.  The webinar guides healthcare providers of...
Read More

PYA On-Demand Webinar Outlines the New Revenue Recognition Standard in Preparation for Implementation

Gaining a deeper understanding of the legalities associated with academic medical centers (AMCs) and other teaching hospitals will be the focus this winter at the American Health Lawyers Association (AHLA)...
Read More

PYA Supports AHLA Programming for AMCs and Teaching Hospitals

PYA Senior Manager Valerie Rock authored an article, “New Payment Review Strategies: What to Do If You Receive an Outlier Coding Notice,” which was recently published in Medical Economics magazine....
Read More

“New Payment Review Strategies: What to Do If You Receive an Outlier Coding Notice”

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