The FASB Not-for-Profit Advisory Committee (NAC) convened for its semiannual meeting on March 20, 2025, engaging in robust discussions on standard-setting priorities, implementation feedback, and current challenges in nonprofit financial reporting. For CFOs and finance leaders in the sector, the meeting shed light on key areas where changes may be forthcoming and where advocacy or preparation may be needed.
Agenda Consultation: Defining the Sector’s Future Priorities
The heart of the meeting was a focused conversation on FASB’s current agenda consultation. Committee members emphasized several pressing needs, notably the development of standardized operating measures for nonprofits to enhance comparability across organizations. Given the sector’s diversity, uniformity in operating metrics has long been a challenge.
The NAC also recommended reevaluating the treatment of nonprofit entities with conduit or public debt under the generally accepted accounting principles (GAAP) definition of a “public entity.” Members argued these organizations often align more closely with other Not-for-Profits (NFPs) in mission and resource structure and should be grouped accordingly in standard application and transition requirements.
Additional areas identified as top priorities included:
- Clarifying consolidation guidance for nonprofits, which remains complex and inconsistently applied.
- Aligning accounting treatment for public-private partnerships with parallel Government Accounting Standards Board (GASB) standards to help reduce reporting disparities.
- Enhancing liquidity disclosures to provide clearer insight into resource availability.
- Reforming the statement of cash flows — either through targeted changes to the presentation of certain items like investment income or a more comprehensive overhaul.
- Disaggregating investment returns on the statement of activities, including separating realized and unrealized gains and losses.
While most topics received broad support, the Committee advised that accounting for below-market and interest-free loans to nonprofits should not be prioritized, citing sufficient existing guidance and that the challenges that some face are case-specific in nature.
Implementation Feedback: Leases and Credit Losses
The NAC also reviewed the implementation experiences of recent standards with FASB staff. With regard to ASC Topic 842, Leases, members noted a significant initial implementation burden but acknowledged that ongoing application has provided greater transparency and comparability of leasing activities in nonprofit financial statements.
In response to the proposed amendments to Topic 326, Credit Losses, Committee members supported extending simplified guidance for measuring credit losses on receivables and contract assets to all nonprofit organizations — not just private companies and smaller NFPs—as a way to help reduce reporting burdens.
Updates on Key FASB Projects
Several active FASB projects were discussed, including:
- Software Costs (Subtopic 350-40): Members applauded efforts to modernize guidance to reflect current software development practices. Although implementation costs are expected to be minimal, the NAC supported a deferred effective date to ease the transition.
- Derivatives Scope Refinement (Topic 815): While Issue 2, customer-issued share-based payment, was seen as irrelevant to most NFPs, Issue 1, additional derivative scope exception may benefit healthcare organizations managing complex revenue arrangements.
- Codification Improvements: The NAC recommended removing paragraph 958-310-35-3 for Issue 25, “Clarify Accounting for Certain Receivables by Not-for-Profit Entities” rather than revising it, to better clarify accounting for certain receivables by nonprofits.
- Environmental Credit Programs (Topic 818): Committee members, including financial statement users, emphasized the value of enhanced disclosures in this space, especially as interest in environmental initiatives continues to grow
Looking Ahead: Intangibles and Inconsistencies Across Frameworks
The NAC explored potential future work on accounting for intangible assets — particularly the challenges in valuing internally developed versus acquired intangibles. While important for comparability, members acknowledged the high cost and complexity of such efforts.
The meeting also surfaced ongoing concerns about inconsistencies between FASB and GASB guidance, particularly in areas like leases and technology arrangements, as well as divergent treatments of government grants provided to nonprofits versus business entities.
Final Thoughts
While no final decisions are made at NAC meetings and are only made after deliberation by the FASB’s Board, the NAC’s insights play a critical role in shaping FASB’s priorities. CFOs of nonprofit organizations should stay tuned for updates on these topics and assess how potential changes might affect financial reporting, especially in areas such as liquidity disclosure, investment income presentation, and consolidation practices.