Almost one year has passed since the Financial Accounting Standards Board (“FASB”) released guidance for contributions accounting, but several nonprofit organizations still struggle with understanding the new provisions. At a March 4 meeting on accounting needs and concerns impacting the nonprofit industry, the FASB’s Not-for-Profit Advisory Committee acknowledged that nonprofits need more guidance to apply Accounting Standards Update No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made.
The advisory panel argued that the nonprofit sector needs assistance with accounting for cost-sharing rules, in particular government agreements. The panel suggested nonprofits need to know the extent of such agreements, such as whether they are analogous or traditional, or feature matching or challenge grants. One committee member referenced government entities using the terms “matching” and “cost-sharing” interchangeably, when they actually are not similar, as an example.
Also suggested was further clarification on what situations a budget and certain rules on a budget and grant might create limited discretion. Discussions at the meeting indicated nonprofits are not at a consensus on how to approach such matters.
The Not-for-Profit Advisory Committee recommended that the FASB issue a staff question and answer (“Q&A”) document to address some of the judgements necessary to apply the guidance. Based on discussions, if the FASB releases the staff Q&A, then the American Institute of Certified Public Accountants may quote the document in its audit guide. Additionally, nonprofits must be able to quote the guidance in their publications.