FASB Board Proposes Changes to Nonprofit Cash Flow Statement

On October 23, 2013, the Financial Accounting Standards Board (FASB or Board) met to discuss ways to improve the statement of cash flows presentation for nonprofit organizations.  This is a continuation of the Board’s project entitled “Not-for-Profit Financial Reporting:  Financial Statements.”

The tentative decisions made by the Board at this meeting included the following changes:

  • Require that nonprofit organizations use the direct method of reporting cash flows provided by/used in operating activities.  However, the current requirement to show the reconciliation of the change in net assets to the net cash flow from operating activities using the indirect method would be removed.
  • Revise how the items detailed within the statement of cash flows are classified as follows:
Current Presentation Proposed Presentation
Cash gifts received with donor-imposed restrictions stating that the organization use the funds to purchase, construct or otherwise acquire long-lived assets for operating purposes Inflows from financing activities Inflows from operating activities
Cash payments to purchase, construct or otherwise acquire long-lived assets for operating purposes Outflows from investing activities Outflows from operating activities
Cash dividends and interest income Inflows from operating activities Inflows from investing activities
Cash payment of interest expense Outflows from operating activities Outflows from financing activities
These tentative decisions will be considered in ongoing discussions and the development of a proposal for public comment on the full spectrum of the proposed changes to the financial statements of nonprofit organizations as a result of this project.  Based on FASB’s technical plan, an Exposure Draft is expected to be issued in the first quarter of 2014 reflecting all of the project’s proposals related to the presentation of nonprofit organization financial statements.

For more information on earlier FASB discussions and other tentative decisions made by the Board, please see my article in the Fall 2013 issue of the Nonprofit Standard.