Nonprofits have long been allowed a great deal of flexibility in self-defining an intermediate measure of operations in the statement of activities, if elected by the organization. The recent Financial Accounting Standards Board (FASB) exposure draft on not-for-profit financial reporting also acknowledges the increased popularity of presenting an intermediate measure of operations by nonprofits. The exposure draft proposes changes in the definition of an intermediate measure of operations that will make it more widely used. However, a recent article from the American Institute of Certified Public Accountants (AICPA) highlights comments from the FASB on the improper application of current GAAP rules, specifically on reporting of gains and losses on the disposal of long-lived assets outside of the intermediate operating measure.
It is important to remember that if a subtotal, such as income from operations, is presented, it should include the following amounts.
- An impairment loss recognized for a long-lived asset to be held and used.
- Costs associated with an exit or disposal activity that does not involve a discontinued operation.
- A gain or loss recognized on the sale of a long-lived asset that is not a component of an entity.
These gains and losses should not be classified as non-operating and is in violation of GAAP guidelines should such gains and losses be excluded from the operating measure.
For more information on this topic, please go to the AICPA website article Not-for-Profits are Not Complying with GAAP, According to FASB Staff.
BPM is here to help you. Contact your BPM Nonprofit Advisor, email firstname.lastname@example.org, or Daniel Figueredo at DFigueredo@bpmcpa.com or (415) 421-5757.