KPMG Comments on FASB Proposal to Improve Presentation of Financial Statements for Not-for-Profit Entities
Aug 24, 2015
From the Financial Reporting View
KPMG LLP recently commented on the proposed FASB ASU, Presentation of Financial Statements of Not-for-Profit Entities, which is intended to improve financial reporting and disclosures by not-for-profit entities (NFPs). KPMG supports certain proposals that address issues that are specific to NFPs, including reducing the number of net asset classes, changing the classification of the underwater portion of endowments, and removing the accounting policy election related to releases of restrictions for capital gifts. The firm also supports the Board’s proposal to eliminate the requirement for NFPs to disclose total investment expenses and the option for NFPs to present investment return and expenses on a gross basis.
However, KPMG suggested that the Board defer standard setting related to certain aspects of the proposed ASU until it comprehensively deliberates the effect of those proposals on all entities. Specifically, the proposed ASU would require NFPs to report two intermediate measures of operations, as defined by the FASB, in the statement of activities. It also would require NFPs to present the statement of cash flows using the direct method and new definitions of operating, investing, and financing cash flows that are different from the definitions applied by NFPs today, and are different from the definitions applied by business entities. Those proposals would create additional differences between the financial reporting models for NFPs and business entities. KPMG also provided suggestions for enhancing the overall proposal.