Recently, CohnReznick’s Not-for-Profit and Education practice hosted a webinar titled, “2024 FASB Update for Not-for-Profit and Educational Organizations.” The webinar consisted of a presentation from Jeff Mechanick, Assistant Director and Chairman of the Not-for-Profit Advisory Committee at the FASB, and was moderated by John Alfonso, Not-for-Profit and Education Industry leader at CohnReznick, and Catherine Syslo, Not-for-Profit National Assurance Partner at CohnReznick.

The webinar, 2024 FASB Update for Not-for-Profit and Educational Organizations, is part of our ongoing Not-For-Profit Governance & Financial Management Webinar Series. 

In this article we detail the main highlights of the key standard updates discussed during the webinar that all not-for-profit and educational organizations need to consider:

ASU 2016-13 Current Expected Credit Loss model

The ASU is effective for Not-for-Profit and Educational organizations for fiscal years beginning after Dec. 15, 2022.

Key provisions for the ASU:

The FASB has developed a Q&A that provides guidance on using historical loss information, and developing reasonable and supportable forecasts in the new credit loss model.  

Accounting Standards Update (ASU) 2023-01 Leases – Common Control Arrangements

 The ASU is effective for all entities for fiscal years beginning after Dec. 15, 2023, including interim periods within those fiscal periods. Early adoption is permitted.  Entities can use the same transition method elected to adopt Topic 842 or retrospectively or prospectively for the amortization of leasehold improvements under common control.

Key provisions for the ASU:

The ASU provides guidance for private companies, and not-for-profit and educational organizations on whether a lease exists and how to amortize leasehold improvements under common control arrangements. 

Entities may elect a practical expedient to use the written terms and conditions of a common control arrangement to determine whether a lease exists and the appropriate classification for accounting purposes. This practical expedient can be applied on a lease-by-lease basis. If no written terms or conditions exist, the entity cannot apply the practical expedient and must use the legally enforceable terms and conditions to determine if a lease exists. An entity is permitted to document any existing unwritten terms and conditions under this arrangement as part of the transition.

Leasehold improvements associated with common control leases are amortized over the useful life of the leasehold improvements instead of the lease term as long as the lessee controls the use of the underlying assets. If the useful life of the common control leasehold improvements does exceed the length of the lease term, the entity must disclose this information.

ASU 2023-08 Intangibles- Goodwill and Other- Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets

The ASU is effective for Not-for-Profit and Educational organizations for fiscal years beginning after Dec. 15, 2024, including interim periods within those fiscal years. Early adoption is permitted.  In the year of implementation beginning net assets should be adjusted for transition to fair value.

Under the standard, crypto assets would be classified separately on the statement of financial position from other intangible assets.  The assets would be measured at fair value replacing the historical cost impairment model. Gain and losses would be reported on the statement of activities separate from the amortization of other intangible assets in operating activities unless designated for an endowment or other long-term purposes.  On the statement of cash flows crypto assets received in the ordinary course of business or as a contribution, and immediately converted to cash would be classified as operating activities. If the crypto assets received carried a donor-imposed restriction for long-term purposes or capital use then that activity would be classified as financing activities.  The standard includes enhanced disclosure requirements including significant crypto asset holdings, restriction on the crypto assets, roll forward of the activity, and historical realized gains and losses.

To be considered a crypto asset under this proposed standard the following six criteria need to be met:

1. The asset must meet the definition of an intangible asset.
2. The asset does not provide the asset holder enforceable rights to, or claims on, underlying goods, services, or other assets.
3. The asset resides on a distributed ledger or blockchain.
4. The asset is secured through cryptography.
5. The asset is fungible.
6. The asset is not created by a reporting entity or related party.

FASB technical and research projects

 Below are some FASB technical and research projects currently in progress that were discussed during the webinar. 

Intersection of Environmental, Social, and Governance (ESG) with Financial Accounting Standards

The FASB staff developed an educational paper to provide investors and others interested with an overview of the intersection of ESG matters with financial accounting standards. This includes an overview of ESG reporting, FASB’s role in setting financial accounting standards, and an overview of the intersection of ESG matters with financial accounting standards.

Accounting for and disclosure of software costs

This project focuses on targeted improvements to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software.  The project focuses on whether costs should be capitalized or expensed for software with unresolved high-risk development issues.  Additionally, the project looks to clarify the starting capitalization threshold for nonlinear software development.

The board is currently drafting the improvement and an exposure draft is expected in the third quarter of 2024.