How ASU 2016- 14 Will Affe c t Your Not- for - Pr ofit E ntitie s - PowerPoint PPT Presentation

How ASU 2016- 14 Will Affe c t Your Not- for - Pr ofit E ntitie s Pa rt I: L iquidity a nd E xpe nse Alloc a tion De c e mb e r 8, 2016

T o da y’ s Pre se nte rs T r e nt F oste r , CPA Par tne r We ave r E duc atio n and No npro fit Prac tic e L e ade r 2

L e a rning Ob je c tive s ASU 2016-14 Pre se nta tio n o f F ina nc ia l Sta te me nts o f No t-fo r-Pro fit E ntitie s L iq uidity • E xpe nse Allo c a tio n • 3

Po lling Que stio n # 1 Ho w re a dy is o ur o rg a niza tio n to imple me nt ASU 2016-14? A. Ve ry re a dy: we ha ve a lre a dy imple me nte d B. So me wha t re a dy: we ha ve pla ns in pla c e to imple me nt C. We will g e t the re : still trying to fig ure o ut the re a l impa c t to o ur o rg a niza tio n D. No t sure : Wha t is ASU 2016-14 4

Re c a p o f ASU 2016-14 5

Po lling Que stio n # 2 Whe n is ASU 2016-14 e ffe c tive ? A. Ca le nda r ye a r 2017 o r fisc a l ye a r 2018 B. Ca le nda r ye a r 2018 o r fisc a l ye a r 2019 C. Ca le nda r ye a r 2019 o r fisc a l ye a r 2020 D. Ca le nda r ye a r 2020 o r fisc a l ye a r 2021 6

NF P F ina nc ia l Sta te me nts Pro je c t T ime line for Adoption ► E ffe c tive fo r fina nc ia l sta te me nts fo r fisc a l ye a rs b e g inning afte r De c e mbe r 15, 2017 (i.e . c a le nda r YE ‘ 18 a nd fisc a l YE ’ 19) ► E mitte d , ar ly adoption is pe r sub je c t to the de sig na te d tra nsitio n me tho d 7

NF P F ina nc ia l Sta te me nts Pro je c t ? WHAT I S I T ► Upda te , not o ve rha ul ► Sig nific a nt c ha ng e s ► Upda te s to a ll thre e fina nc ia l sta te me nt type s 8

NF P F ina nc ia l Sta te me nts Pro je c t Goa ls And Obje c tive s ► I mpro ve ne t a sse t c la ssific a tio n ► I mpro ve info rma tio n in fina nc ia l sta te me nts a nd no te s: » F ina nc ia l pe rfo rma nc e » Ca sh F lo w » L iq uidity ► Be tte r e na b le NF Ps to te ll the ir fina nc ia l sto ry ► Be tte r se rve the ne e ds o f fina nc ia l sta te me nt use rs ► Cre a te c la rity, unifo rmity a nd c o mpa ra b ility in re po rting a c ro ss the fina nc ia l sta te me nts o f va rio us NF Ps ► Pro vide do no rs a nd le nde rs with liq uidity info rma tio n to b e tte r a sse ss the fina nc ia l he a lth o f the NF Ps 9

Summa ry o f the Cha ng e s  Ne w liq uidity a nd a va ila b ility disc lo sure s re q uire d  Ne t a sse t c la sse s re duc e d fro m thre e to two  Additio na l disc lo sure s fo r unde rwa te r e ndo wme nts  All no t-fo r-pro fits (NF Ps) must re po rt e xpe nse s b y na ture a nd func tio n in o ne pla c e , a nd de sc rib e the me tho ds use d to a llo c a te a mo ng func tio na l c a te g o rie s 10

Summa ry o f the Cha ng e s  Ne t inve stme nt re turn re pla c e s o the r a lte rna tive s  Use o f dire c t me tho d in a sta te me nt o f c a sh flo ws e limina te s re c o nc ilia tio n o f c ha ng e in ne t a sse ts to c a sh flo ws fro m (use d fo r) o pe ra ting a c tivitie s 11

L e a rning Ob je c tive s Change s to L iquidity and Availability 12 12

ASU 2016-14 L iquidity  Re a so ns fo r c ha ng e :  Ma ke it e a sie r fo r re a de rs o f the fina nc ia l sta te me nts to a sse ss the org a niza tion’s liquidity a nd to de te rmine the a va ila b ility o f re stric te d re so urc e s to fund g e ne ra l e xpe nditure s  Adde d tra nspa re nc y

NF P F ina nc ia l Sta te me nts Pro je c t L iquidity e nt GAAP: T he re is no re q uire me nt to disc lo se Cur r info rma tio n a b o ut liq uidity, a ltho ug h sta te me nt o f fina nc ia l po sitio n must b e pre se nte d in o rde r o f liq uidity. F ASB to o k a de e p lo o k into liq uidity a nd a va ila b ility o f funds: ► L iquidity: Re la te s to the type o f a sse ts the Org a niza tio n ha s a nd the ma turity o f tho se a sse ts to me e t c urre nt o b lig a tio ns. ► Availability: I s it a va ila b le fo r use ? Are the re do no r impo se d o the r e xte rna l re stric tio ns? Or e ve n se lf-impo se d limits? 14

NF P F ina nc ia l Sta te me nts Pro je c t L iquidity T he F ASB Bo a rd de c ide d tha t a n e ntity ne e ds to disc lo se ho w it ma na g e s its liq uidity a nd a va ila b ility. Yo ur o rg a niza tio ns fina nc ia l sta te me nts will no w ne e d to disc lo se the fo llo wing : A. Quantitative infor mation: All about the numbe r s B. Qualitative infor mation: All about the wor ds 15

Ste ps to T a ke L iquidity ► De te rmine the fo rma t to pre se nt the re q uire d q ua ntita tive disc lo sure o f liq uidity info rma tio n ► Ga the r info rma tio n fo r q ua ntita tive fo o tno te re q uire me nts. » Asse ss ho w the y ma na g e the ir liq uid » E va lua te a ll o rg a niza tio n fina nc ia l a sse ts (this c a n g e t tric ky) 16

F irst Ste ps to T a ke L iquidity Ga the r info rma tio n fo r q ua lita tive fo o tno te re q uire me nts.  I de ntify a ll fina nc ia l a sse ts  Po lic y fo r ma na g ing liq uidity 17

Po lling Que stio n # 3 Do yo u think yo ur use rs o f the fina nc ia l sta te me nts will g e t a ny b e ne fit fro m this ne w disc lo sure ? A. Ye s, fro m the Qua lita tive po rtio n B. Ye s, fro m the Qua ntita tive po rtio n C. Ye s, fro m A & B D. No , I do n’ t think it will he lp 18

Po lling Que stio n # 3 Do yo u think yo ur use rs o f the fina nc ia l sta te me nts will g e t a ny b e ne fit fro m this ne w disc lo sure ? ► Po ll Re sults 19

NF P F ina nc ia l Sta te me nts Pro je c t L iquidity E XAMPL E F OOT NOT E A Qua ntita tive : NF P A ha s $395,000 o f fina nc ia l a sse ts a va ila b le within 1 ye a r o f the b a la nc e she e t da te to me e t c a sh ne e ds fo r g e ne ra l e xpe nditure c o nsisting o f c a sh o f $75,000, c o ntrib utio ns re c e iva b le o f $20,000, a nd sho rt-te rm inve stme nts o f $300,000. No ne o f the fina nc ia l a sse ts a re sub je c t to do no r o r o the r c o ntra c tua l re stric tio ns tha t ma ke the m una va ila b le fo r g e ne ra l e xpe nditure within o ne ye a r o f the b a la nc e she e t da te . T he c o ntrib utio ns re c e iva b le a re sub je c t to implie d time re stric tio ns b ut a re e xpe c te d to b e c o lle c te d within o ne ye a r. Qua lita tive : NF P A ha s a g o a l to ma inta in fina nc ia l a sse ts, whic h c o nsist o f c a sh a nd sho rt-te rm inve stme nts, o n ha nd to me e t 60 da ys o f no rma l o pe ra ting e xpe nse s, whic h a re , o n a ve ra g e , a ppro xima te ly $275,000. NF P A ha s a po lic y to struc ture its fina nc ia l a sse ts to b e a va ila b le a s its g e ne ra l e xpe nditure s, lia b ilitie s, a nd o the r o b lig a tio ns c o me due . I n a dditio n, a s pa rt o f its liq uidity ma na g e me nt, NF P A inve sts c a sh in e xc e ss o f da ily re q uire me nts in va rio us sho rt-te rm inve stme nts, inc luding c e rtific a te o f de po sits a nd sho rt-te rm tre a sury instrume nts. As mo re fully de sc rib e d in No te XX, NF P A a lso ha s c o mmitte d line s o f c re dit in the a mo unt o f $20,000, whic h it c o uld dra w upo n in the e ve nt o f a n una ntic ipa te d liq uidity ne e d. 20

NF P F ina nc ia l Sta te me nts Pro je c t L iq uidity E XAMPL E F OOT NOT E B NF P A’ s fina nc ia l a sse ts a va ila b le within o ne ye a r o f the b a la nc e she e t da te fo r g e ne ra l e xpe nditure a re a s fo llo ws. NF P A’ s e ndo wme nt funds c o nsist o f do no r-re stric te d e ndo wme nts a nd a q ua si-e ndo wme nt. I nc o me fro m do no r-re stric te d e ndo wme nts is re stric te d fo r spe c ific purpo se s a nd, the re fo re , is no t a va ila b le fo r g e ne ra l e xpe nditure . As de sc rib e d in No te Y, the q ua si-e ndo wme nt ha s a spe nding ra te o f 5 pe rc e nt. $1.65 millio n o f a ppro pria tio ns fro m the q ua si-e ndo wme nt will b e a va ila b le within the ne xt 12 mo nths. As pa rt o f NF P A’ s liq uidity ma na g e me nt, it ha s a po lic y to struc ture its fina nc ia l a sse ts to b e a va ila b le a s its g e ne ra l e xpe nditure s, lia b ilitie s, a nd o the r o b lig a tio ns c o me due . I n a dditio n, NF P A inve sts c a sh in e xc e ss o f da ily re q uire me nts in sho rt-te rm inve stme nts. T o he lp ma na g e una ntic ipa te d liq uidity ne e ds, NF P A ha s c o mmitte d line s o f c re dit in the a mo unt o f $20 millio n, whic h it c o uld dra w upo n. Additio na lly, NF P A ha s a q ua si-e ndo wme nt o f $33 millio n. Altho ug h NF P A do e s no t inte nd to spe nd fro m its q ua si-e ndo wme nt o the r tha n a mo unts a ppro pria te d fo r g e ne ra l e xpe nditure a s pa rt o f its a nnua l b udg e t a ppro va l a nd a ppro pria tio n pro c e ss, a mo unts fro m its q ua si-e ndo wme nt c o uld b e ma de a va ila b le if ne c e ssa ry). 21

NF P F ina nc ia l Sta te me nts Pro je c t L iq uidity E XAMPL E F OOT NOT E C 22

NF P F ina nc ia l Sta te me nts Pro je c t L iq uidity E XAMPL E F OOT NOT E C Qua lita tive E xa mple 23