My four-year term with the Financial Accounting Standards Board (FASB) Not-for-Profit Advisory Committee (NAC) began January 1, 2022. The NAC, established in 2009, is a standing committee that advises FASB on timely matters related to the development of financial accounting and reporting standards.
During the spring semester of 2021 I was an associate instructor for a nonprofit financial management course with Columbia University’s masters in nonprofit management program — part of its School of Professional Studies. The lead instructor was Jeffrey Mechanick, assistant director-nonpublic entities for the FASB and the current chair of the NAC. Working with him, I learned a lot about his work with the FASB and particularly the NAC. I reached out to Jeff about independent school representation on the NAC, and he encouraged me to submit a nomination. I interviewed in October of 2021 and learned in December that I had been selected.
Many nonprofit groups are represented on the NAC. These include healthcare, higher education, foundations, banking and credit rating agencies. Accounting firms are also represented as not-for-profit practitioners and subject matter experts. At times, we share similar perspectives on financial reporting issues. Other times, we will have differing views. For example, a nonprofit hospital may be much more concerned with revenue recognition than a foundation. We meet twice a year at the FASB’s offices in Norwalk, Connecticut.
Advocating for continued improvements in transparency for our boards, donors and lenders is of particular importance to me. Fund accounting adds complexity to the consolidated picture of an independent school and makes it difficult to clearly interpret operating financial performance as compared to fundraising performance and a school’s liquidity position.
As a member of NBOA’s Business Officer Council and as a business officer at a member school, my role is to listen to and engage with independent school constituents and report out to the NAC on topics relevant to our organizations. I hope to bring more awareness to independent schools and members of NBOA about the role of the FASB and the NAC, as well as to advocate on behalf of NBOA and independent schools on financial reporting matters important to our schools. Advocating for continued improvements in transparency for our boards, donors and lenders is of particular importance to me. Fund accounting adds complexity to the consolidated picture of an independent school and makes it difficult to clearly interpret operating financial performance as compared to fundraising performance and a school’s liquidity position.
For our first meeting of the year, held in March, members provided feedback on various current and future FASB agenda topics. Two topics of interest to independent schools I want to share are Reporting for Gifts-in-Kind and Accounting for Exchange-traded Digital Assets.
When we met, it had been about a year and a half since the FASB issued Accounting Standard Update (ASU) No. 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets in September 2020. We considered how the implementation of this update has gone; it was issued to improve transparency around the presentation and disclosure of contributed nonfinancial assets for not-for-profit entities, more generally known as gifts-in-kind. This includes how these assets are used in the organizations’ programs and activities and how they are valued. The NAC has regularly solicited input on common practice issues and questions regarding this ASU since its issuance in 2020.
Accounting for Exchange-traded Digital Assets is particularly relevant to independent schools, as many of us prepare for receiving and accepting future cryptocurrency contributions or as payment for tuition. Over the past year, the FASB received requests to add digital assets to its agenda. In May 2021, the FASB issued an Invitation to Comment (ITC), the purpose of which is to solicit feedback on financial reporting issues the FASB should consider. In December 2021, the topic of digital assets was added to the FASB research agenda. The staff will continue to monitor digital asset developments and prepare for a formal agenda decision in 2022. We will need to consider how to account for and value digital asset gifts, whether our investment policy statements will need to be updated to allow for this class of assets, and from a practical perspective, engaging with a third-party to physically accept a digital currency. I shared with the NAC that our sector is proactively thinking about this topic, highlighting that NBOA recently held a webinar “The Essentials of Cryptocurrency and Digital Transformation.”
I encourage you to reach out to NBOA or me directly if you have feedback on any current or upcoming FASB agenda items of relevance to your schools. Your feedback is important to continuous improvement in not-for-profit financial reporting.