Proposed Update on Cash Flow Presentation for Not-for-Profit Organizations

The Financial Accounting Standards Board (“FASB”) recently released Proposed Accounting Standards Update (“PASU”), Statement of Cash Flows (Topic 320): Not-for-Profit Entities: Classification of the Sale of Donated Securities in the Statement of Cash Flows.

Currently, some not-for-profit (“NFP”) organizations classify receipts from the sale of donated securities as investing cash flows.  Other NFP’s treat such cash receipts as either operating or financing cash flows, consistent with how the organization treats cash contributions and depending on whether or not the donated securities were intended to be used for long-term purposes.

To eliminate the diversity in current practice, the amendments in this PASU would require an NFP to classify cash receipts from the sale of donated securities as either operating or financing cash flows if the following two conditions are met: (A) the receipts were from the sale of donated securities that were directed for sale upon receiving the gift; and (B) the NFP avoided significant investment risks and rewards through the near immediate conversion of the securities to cash.

Consequently, the cash receipts from the sale of donated securities in which these two criteria were met would be classified as financing cash flows if the donor restricted the use of his or her contribution for long-term purposes, or operating cash flows if the contribution was not restricted for long-term purposes.  Absent these two conditions, the receipts from the sale of donated securities would be classified as investing cash inflows.

The FASB will accept comments on this PASU until July 16, 2012. The effective date will be determined after the FASB considers feedback received, but early adoption will be permitted.

For more information on this PASU or other financial reporting matters, please contact the expert listed below at PYA, (800) 270-9629.

Recommended Links:

Read the FASB Exposure Document regarding the above topic.

More information on PYA’s Healthcare Audit & Accounting Services.

Doug Arnold

Doug Arnold


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