FASB issues FAS 117-a regarding endowments held by not-for-profits

The Financial Accounting Standards Board (FASB) has issued proposed FASB Staff Position (FSP) FAS 117-a, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures. This FSP seeks feedback from constituents on proposed guidance intended to improve the quality and consistency of financial reporting of endowments held by not-for-profit organizations.

"The issues addressed by this FSP have widespread importance to the not-for-profit sector, especially organizations with sizeable endowments, and the users of their financial statements, such as donors, credit rating agencies, and regulators," states Jeffrey Mechanick, FASB project manager. "The adoption of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA) has raised significant questions about the reporting of donor-restricted endowment funds. Organizations across the country now find themselves subject to increased public scrutiny on how they manage and use their endowments, which in many instances have seen tremendous growth over the past decade."

This FSP would provide guidance on classifying the net assets (equity) associated with donor-restricted endowment funds held by organizations that are subject to an enacted version of UPMIFA, which serves as a model act for states to modernize their laws governing donor-restricted endowment funds. A number of states have already done so, and many more are expected to do so over the next few years.

This FSP would also require additional disclosures about endowments (both donor-restricted funds and board-designated funds) for all organizations, including those that are not yet subject to an enacted version of UPMIFA.

The provisions of this FSP would be effective for fiscal years ending after June 15, 2008. Early application would be permitted, as long as the organization has not previously issued annual financial statements for that fiscal year.

The FSP invites individuals and organizations to submit comments on the proposed guidance. Responses must be received in writing by April 18, 2008.

Interested parties should submit their comments by e-mail to director@fasb.org, File Reference: Proposed FSP FAS 117-a.

Those without e-mail may send their comments to

Russell G. Golden
Director of Technical Application and Implementation Activities
FASB
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116
File Reference: Proposed FSP FAS 117-a.

Responses should not be sent by fax. All comments received by the FASB are considered public information. Those comments will be posted to the FASB Web site and included as part of the project record with other project materials.

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