Last Friday, the AICPA issued a financial reporting white paper, “Measurement of Fair Value for Certain Transactions of Not-for-Profit Entities,” which provides nonauthoritative fair value measurement guidance on (1) unconditional promises to provide cash or other financial assets, (2) beneficial interests in trusts, and (3) split-interest agreements. In applying the concepts of ASC 820,¹ not-for-profit entities have been challenged by these three types of transactions, primarily because of the absence of a market for the financial assets and liabilities resulting from these transactions.

Matters addressed in the white paper include the following:

• “Use of market inputs when valuing split-interest obligations, including use of actuarial data and prices for annuity contracts
• The unit-of-account for unconditional promises to give that are expected to be collected in one year or more and for beneficial interests in a trust”
• “Valuation approaches and techniques, including variations of the income approach using probability-weighted cash flows or a single set of cash flows model that uses a risk-adjusted discount rate
• Considerations for determining an appropriate valuation technique based on facts and circumstances, as well as considerations for the related inputs to the valuation model
• Determination of an appropriate discount rate when using present value techniques”
• “Disclosure considerations.”

The AICPA Governmental Audit Quality Center is hosting a two-hour webcast on Tuesday, November 1, from 1:00 to 3:00 p.m. EDT, on the guidance addressed in the white paper. Registration for the webcast is available on the AICPA’s Web site.

[1] FASB Accounting Standards Codification Topic 820, Fair Value Measurement.