THE SOCIETY FOR FINANCIAL EDUCATION AND PROFESSIONAL DEVELOPMENT, INC. 8 TH ANNUAL FINANCIAL LITERACY LEADERSHIP CONFERENCE FASB EXPOSURE DRAFT

FINANCIAL STATEMENT PROJECT Last overhaul 20 years ago FASB NFP Advisory Committee (NAC) Project objectives: – Refresh the current model, to better tell the financial story – Improve net asset classification, liquidity information, financial performance and cash flow statement 2 October 27, 2015

REASONS FOR THE PROPOSED UPDATE Complexity of the current three classes of net assets Inconsistency in reporting Inconsistencies in the type of information provided about expenses of the period Opportunity to enhance the usefulness of the statement of cash flows 3 October 27, 2015

MAIN PROVISIONS Net asset classes Liquidity information Activity statement Cash flow statement Project timeline 4 October 27, 2015

NET ASSETS 5 Source: Financial Accounting Standards Board October 27, 2015

STATEMENT OF FINANCIAL CONDITION Issues: Misinterpretation of temporary restrictions, temporary v. permanent restrictions Changes: – 2 classes of net assets from 3 – Without donor restriction and with donor restriction – Added guidance to require disclosure of information to asses a NFP liquidity position 6 October 27, 2015

STATEMENT OF ACTIVITIES Present on the statement of activities amounts for the 2 classes of net assets Subtotals for Operational Activities Subtotal for Operational internal transfers in/out Subtotal for Non Operational activity 7 October 27, 2015

ONE STATEMENT APPROACH 8 Source: Financial Accounting Standards Board October 27, 2015

TWO STATEMENT APPROACH 9 Source: Financial Accounting Standards Board October 27, 2015

TWO STATEMENT APPROACH (cont’d) 10 Source: Financial Accounting Standards Board October 27, 2015

STATEMENT OF CASH FLOWS Direct method Operating – acquisition and sales of long term assets Financing – payments of interest Investing – Interest and dividend income 11 October 27, 2015

CASH FLOW STATEMENT Require Direct Method for operating cash flows – No longer require Indirect Method – Should indirect method still be required for certain NFPs? Re-categorize certain items to better align operating cash flows with the operating measures – Purchases of & proceeds on sales of long-lived assets (e.g., PP&E; capitalized and non-capitalized collections) – Cash gifts from interest & dividends – Interest paid on long-term debt 12 October 27, 2015

ENHANCED DISCLOSURES Governing board designations Description of how the net assets with donor restrictions affect the use of resources Management of liquidity information Expenses by nature and function 13 October 27, 2015