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U.S. comment letter on presentation of financial statements of not-for-profit entities

Published on: Aug 21, 2015

An excerpt from the comment letter is shown below:

We support the Board’s efforts to improve the current net asset classification and financial statement presentation requirements for not-for-profit (NFP) entities and to address issues that are unique to NFP and health care entities. Further, we support ongoing improvements to the financial reporting framework for NFP entities and agree with some of the changes outlined in the proposed ASU. We also agree with the FASB’s efforts to eliminate complexity related to distinguishing between permanent and temporary restrictions within an NFP entity’s financial statements. The presentation of just two classes of net assets (net assets with donor restrictions and net assets without donor restrictions) in the statement of financial position would reduce complexity while still providing users with relevant information. In addition, enhanced disclosures would provide financial statement users with important information regarding the composition of net assets with donor restrictions at the end of the period as well as liquidity and quantitative information about financial assets available to meet near-term demands for cash.

However, as indicated in the appendix below (our responses to the proposed ASU’s questions for respondents), we do not agree with a number of the proposed changes, particularly those related to the cash flow statement and the statement of operations. In certain cases, the proposed changes address broader issues that we believe should be dealt with more comprehensively to avoid creating accounting differences between NFP entities and other entities for similar circumstances or transactions. In other instances, we do not support the proposed changes because we think they will make the financial reporting for NFP entities unnecessarily complex.


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