Due to FASB’s issued guidance, controllers’ offices have been busy during the last few years. In 2014, FASB standards were issued on revenue recognition. In 2016, FASB issued new standards on leases, nonprofit financial reports, and credit losses. In 2018, FASB issued new guidance for conditional contributions and grants. Over the last few years, each standard issued had different implementation date requirements. Most of these requirements have passed, except the last wave of nonprofits that are now implementing the credit loss standard.
FASB has several projects on its agenda currently, with very few of them impacting nonprofits. However, one project to keep an eye on is the Accounting for and Disclosure of Software Costs, which aims to look over current requirements to see if the requirements can be simplified. This project is still ongoing and has not yet been finalized.
One recently issued accounting standard that could impact nonprofits is related to accounting for cryptocurrency. Issued in December 2023, Accounting Standards Update (ASU) 2023-08—Intangibles—Goodwill And Other—Crypto Assets (Subtopic 350-60): Accounting For And Disclosure Of Crypto Assets should not be difficult to implement. Prior to the implementation of this standard, cryptocurrency was recorded at cost and not adjusted to fair value since cryptocurrency is considered an intangible asset. However, after the new accounting standard is implemented, all entities, including nonprofits, are required to account for cryptocurrency at fair value. FASB created a definition of types of cryptocurrency that are included within the scope of this standard. It is important to consider the standards and determine if the cryptocurrency held is within or outside the scope of the new standard.
Another recent standard issued in March 2023 that could impact nonprofit organizations is ASU 2023-01—Leases (Topic 842): Common Control Arrangements. This new standard has two primary issues. The first issue permits a nonprofit to use the written terms of a lease under common control. Common control is not defined but includes related-party leases for mother/daughter and brother/sister entities. If a nonprofit has a common control lease, it can clarify the terms in writing that exist between the two entities. This issue is only available to nonpublic entities. The second issue addressed in this accounting update was when a lease under common control has a period that is less than the useful life of leasehold improvements, and the entity should amortize the leasehold improvements. If the lease term terminates before the leasehold improvements are fully amortized, the remaining value of leasehold improvements will transfer back to the lessor entity.
FASB’s current agenda is not expected to have a major impact on nonprofits in the near future. It is expected that they will start an Agenda Consultation project later this year. At that time, FASB will seek public input on FASB’s future agenda. If you have any questions or need assistance, please contact a professional at Forvis Mazars.