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Accounting Standards Update for Private and Public Sector NPOs. Presented by: Erica Teklits, Partner and National Leader, NPO Sector November 12, 2013. Overview. 2012 brought ASNPO for private sector NPOs as well as public sector accounting standards with Section 4200 for GNPOs - PowerPoint PPT Presentation
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Accounting Standards Update for Private and Public Sector NPOs
Presented by: Erica Teklits, Partner and National Leader, NPO SectorNovember 12, 2013
Overview
Page 2
• 2012 brought ASNPO for private sector NPOs as well as public sector accounting standards with Section 4200 for GNPOs
• The Accounting Standards Board (AcSB) and Public Sector Accounting Board (PSAB) are working together to improve not-for-profit standards to better meet users’ needs
• Jointly issued Statement of Principles in the summer of 2013• Proposed changes to the 4400/4200 series of Accounting Standards for
Not-for-Profit Organizations and Public Sector NPOs• Not all changes are the same for private and public NPOs, but the most
significant changes harmonize many aspects• Proposal includes some significant changes to measurement,
presentation and disclosure for NPOs
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
The Process
Page 3
• Statement of Principles (current step)- Includes all proposed amendments to standards at a high level perspective - All parties are invited to comment- Deadline is December 15, 2013
• Exposure Drafts- Consider comments from responses to Statement of Principles- Release exposure drafts for each proposed change to a standard (separately)- Comments will again be invited- Will include transitional provisions and possible exemptions
• New Standards- Exposure drafts become new standards, subject to any changes based on comments
• Lengthy Process (3-5 years?)
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
Key Areas of Change
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
Page 5
• Main features that affect both private and public sector NPOs:• A contribution would be recognized as an asset, when the NPO has
control of the contribution, would exercise that control if necessary and can reasonably estimate the amount to be received
• A contribution would be revenue, except when the contribution gives rise to an obligation that meets the definition of a liability
• The proposals replace the deferral and restricted fund methods • The proposals could also have a significant impact on the
accounting for contribution pledges and endowment contributions
Joint AcSB / PSAB ProjectStatement of Principles – Improvements to Not-for-Profit Standards
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
Page 6
• Main features that affect both private and public sector NPOs:• A capital asset would be recognized by an NPO on its statement of
financial position regardless of the size of the NPO (i.e. removing the size exemption currently available)
• The proposals would require expenses to be presented by both function and object (nature) rather than on one of the two bases
• Controlled NPOs would be consolidated, subject to an exclusion for a large number of individually immaterial organizations, and controlled profit-oriented enterprises would be accounted for by the equity method
Joint AcSB / PSAB Project Statement of Principles – Improvements to Not-for-Profit Standards
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
Controlled Entities
Page 7
Type of Entity Current Standard
Proposed Standard
Controlled NPO Consolidate OR disclose
Consolidate
Controlled for profit
Consolidate OR modified equity
method *
Modified equity method *
Jointly controlled entity
modified equity method * OR proportionate
consolidation **
Proportionate consolidation **
*Modified equity method = cost of investment +/- income or loss annually (no adjustment to conform with GAAP or controller)**Proportionate consolidation = consolidate your % ownership of the entity
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
Page 8
• Main features that affect private sector NPOs only:• The accounting for tangible capital assets by a private sector NPO
would follow the standards for private enterprises under ASPE• The proposals would add guidance on accounting for partial write-
downs for both tangible and intangible capital assets• Collections of works of art and historical treasures would be
accounted for at either cost or nominal value in the statement of financial position
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
Joint AcSB / PSAB Project Statement of Principles – Improvements to Not-for-Profit Standards
Statement Of Principles Summary
Page 9
• The Statement of Principles contains other modifications
• Stakeholders have to comment before December 15, 2013 to make their opinions heard
• Inaction may be interpreted as acceptance of the “improvements”
• The real world consequences need to be made known to the AcSB and PSAB
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
2013 ASNPO UPDATEExposure Drafts and Projects
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
Page 11
• The main features of proposed Section 3463 are as follows:• Remeasurements and other items would be:
• recognized directly in net assets in the statement of financial position, rather than in the statement of operations; and
• presented as a separately identified item in the statement of changes in net assets
• Remeasurements and other items would not be reclassified from net assets to the statement of operations in a subsequent period.
• Retrospective application would generally be similar to the requirements in Section 3462 with additional guidance related to the different recognition and presentation of remeasurements and other items
• An NPO would apply all the other requirements in Section 3462• Effective Date: Years beginning on or after January 1, 2014
EXPOSURE DRAFTSection 3463, Employee Future Benefits
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
QUESTIONS
Page 12Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013
Erica TeklitsNational Not for Profit Industry [email protected]
Accounting Standards Update for Private and Public Sector NPOs – November 12, 2013