Transcript Key Performance Measures

FASB & Other Updates
CACUBO Annual Meeting - 2012
© 2012 McGladrey LLP. All Rights Reserved.
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Introductions
Michelle Horaney
Partner, National Leader for
Education
McGladrey LLP
201 N. Harrison Street
Davenport, Iowa 52801
[email protected]
Phone: 563.888.4038
1
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Agenda




Introduction
FASB Standard Setting Activity
OMB Advance Notice
Questions
2
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Objectives
 Develop an understanding of the changes in
existing and new FASB standards and how they
may impact your institutions
 Build an awareness of current FASB projects, their
status and how they might impact your institutions
 Provide a “heads up” for potential changes to OMB
Circular A-133
3
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Definitions
 Webster’s Dictionary ……..
Clarity - the quality or state of being clear, transparency
Relevant – pertinent, applicable, important, significant,
weighty
Significant – important in effect or meaning, substantial, fairly
large
4
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Someone Famous Once Said…. About Fair
Value Disclosures
“I really don’t think these add any real value at
all. The information takes a lot of time to pull
together and I don’t think it helps users understand
them any better.” Anonymous 1
“To say that FASB has gone orbital in its disclosure
requirements regarding fair values is a mild
statement…. few people understand level 1, 2 or 3
and even fewer understand what a practical
expedient is or care. For a single footnote to take 5
pages with 5 tables to describe the process is not
appropriate.” Anonymous 2
5
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
FASB Update No. 2011-04, Fair Value
Measurement
 Topic 820 Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements
in U.S. GAAP and IFRSs
-
Update represents the continued development of
guidance related to fair value measurements in US GAAP
and is the result of FASB and IASB working to align their
guidance with respect to fair value measurements.
-
Effective date
• Public entities – interim and annual periods beginning
after December 15, 2011
• Nonpublic entities – annual periods beginning after
December 15, 2012
6
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
FASB Update No. 2011-04, Fair Value
Measurement
 Topic 820 Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements
in U.S. GAAP and IFRSs (Cont’d)
-
For fair value measurements categorized within Level 3 of
the fair value hierarchy:
• The valuation processes used by the reporting entity
• A narrative description of the sensitivity of the fair
value measurement to changes in unobservable
inputs and the interrelationships between those
unobservable inputs, if any. (not applicable to
nonpublic entities)
7
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
FASB Update No. 2011-04, Fair Value
Measurement
 Topic 820 Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements
in U.S. GAAP and IFRSs (Cont’d)
-
-
Observable input – inputs that reflect the assumptions
market participants would use in pricing the asset or
liability developed based on market data obtained from
sources independent of the reporting entity.
Unobservable input – inputs that reflect the reporting
entity’s own assumptions about the assumptions market
participants would use in pricing the asset or liability
developed based on the best information available in the
circumstances.
8
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
FASB Update No. 2011-09, Compensation
Retirement Benefits – Multiemployer Plans ….
 Subtopic 715-80 Disclosures about an Employer’s
Participation in a Multiemployer Plan
-
The disclosures will provide users of financial statements
with additional information about the plans in which an
employer participates, the level of an employer’s
participation and the financial health of significant plans.
-
Effective date
• Public entities – fiscal years ending after
December 15, 2011
• Nonpublic entities – fiscal years ending after
December 15, 2012
9
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
FASB Update No. 2011-09, Compensation
Retirement Benefits – Multiemployer Plans ….
 Essential Elements of the Disclosures
-
Individually significant plans
• Plan legal name
• Most recent certified funded status, expressed as a
“zone status” as required by the Pension Protection
Act of 2006. If zone status is not available, an
employer should disclose whether the plan was:
- Less than 65 percent funded
- Between 65 and 80 percent funded
- At least 80 percent funded
• Expiration date(s) of collective bargaining agreements
and any minimum funding requirements
10
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
FASB Update No. 2011-09, Compensation
Retirement Benefits – Multiemployer Plans ….
 Essential Elements of the Disclosures (cont’d)
•
-
Indication of whether the employer’s contributions
represent more than 5% of total contributions to the
plan
• Indication of what plans, if any, are subject to a
funding improvement plan
Contributions made to each individually significant plan
and the total contributions made to all other plans in the
aggregate.
A description of the nature and effect of any changes
affecting comparability from period to period for each
period in which a statement of income is presented.
11
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Proposed ASU – Revenue Recognition
 Joint project between FASB and IASB to clarify
revenue recognition and provide for a common
revenue standard
-
Remove inconsistencies and weaknesses
More robust framework to address revenue issues
Improve comparability across entities, industries
Provide more useful information
Simplify preparation of the financial statements
 Focus is on contracts with customers
-
Excludes donations and collaborative agreements
12
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Proposed ASU – Lease Project
 Joint project between FASB and IASB which
focuses on ensuring assets and liabilities related to
leasing arrangements are recognized in the
statement of financial position.
 Two-approaches for recording leases based on
consumption of asset being leased
-
If more than insignificant use, record as a nonfinancial
asset at cost less accumulated depreciation
If not more than insignificant expense straight-line over
lease term
 Lessors – two approaches with same basic premise
13
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Proposed ASU – Disclosures about Liquidity
Risk and Interest Rate Risk
 Addresses stakeholder’s concerns about how
organizations disclose their exposure to liquidity
and interest rate risks.
-
Liquidity risk disclosures intended to provide information
about the risk that the reporting organization will
encounter difficulty when meeting its financial obligations.
Interest rate risk disclosures – good news – would only
apply to financial institutions!
14
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Proposed ASU – Disclosures about Liquidity
Risk and Interest Rate Risk
 Liquidity Risk Disclosure Requirements:
-
Expected cash flow obligations in a table, segregated by
their expected maturities, without being required to include
financial assets in the table.
Available liquid funds in a table.
Quantitative or narrative disclosure of the organization’s
exposure to liquidity risk, including a discussion about
significant changes in the amounts and timing in the
quantitative tables and how the reporting organization
managed those changes during the current period.
15
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Someone Famous Once Said…….
“I hate to admit it, but the Endowment disclosure, which is a
nightmare to prepare, really does give useful and important
information.” Anonymous 3
About the Endowment footnote as compared to the fair value
footnote …..“These are a little more helpful but I think users have
trouble getting their minds around the net asset classifications.”
Anonymous 4
Regarding implementation of more recent standards….. “We are all
very thinly staffed and it’s hard to get administration to agree to
add staff in the accounting area. I would say that with all the
financial statement changes and changes to the 990 we need to
add at least 1 new staff member but that’s probably not going to
happen so we just pile more work on existing staff.” Anonymous 5
16
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Discussion Paper – Disclosure Framework
 Common complaint from virtually all stakeholders
-
Financial statements are just too long and have become
much less effective as a tool for communicating with
investors
 The Rub – Investors continue to say they want
more information
 Project intended to improve the effectiveness of
disclosures by clearly communicating the
information that is most important to an entity’s
financial statement users
17
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Discussion Paper – Disclosure Framework
 The invitation to comment addresses the following
topics:
-
The FASB’s decision process
Making disclosure requirements flexible
A judgment framework that could help each reporting
organization determine which disclosures are relevant in
its specific circumstance
Formatting and organization
Interim disclosures
18
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Discussion Paper – Disclosure Framework
 The FASB believes that a framework for the
disclosures must be established before considering
any specific changes to the existing disclosure
guidelines
-
When the framework has reached a sufficient level of
development, will be applied to existing standards
 The paper does not propose any specific changes
but suggests a number of possibilities that could
lead to more effective disclosures
-
Describes ways in which disclosures need to be improved
Describes at least one possible way to address each need
Solicits information about other areas that need
improvement and other possible ways to achieve
improvement
19
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
EITF – 12A Classification of Sales of Donated
Assets in the Statement of Cash Flows
 Interpretation of Topic 230 mixed between showing
in operating activities section and showing as an
investment activity
 April 2012 Task Force ratified a consensus for
exposure – 90 day comment period
-
-
Cash receipts resulting from sale of donated securities
that are directed upon receipt for sale and for which the
NFP has the ability to avoid investment risks and rewards
through near immediate conversion to cash should
classify the sale as an operating activity
Donor restricted the use of the asset for long-term
purpose then the sale of the investment would result in a
financing activity
20
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
EITF – 12B NFP – Services Received from An Affiliate
for which the Affiliate Does not Seek Compensation
 Groups of affiliated not-for-profit entities (NFPs) often
operate under agreements that provide for acquisition
and deployment of resources for common purposes
and projects. An NFP may receive support and
revenue that is used to pay employees who are then
assigned to work for other affiliated NFPs.
 Current practice: ASU 958-605-25-17 - contributions
of services shall only be recognized if they create or
enhance nonfinancial assets or if they require
specialized skills, are provided by individuals
possessing the skills, and would typically need to be
purchased if not provided by donation.
21
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
EITF – 12B NFP – Services Received from An Affiliate
for which the Affiliate Does not Seek Compensation
 July 2012 the Task Force ratified a consensus-forexposure that a recipient NFP should not apply the
contributed services guidance in paragraph 958-60525-17 for recognizing personnel services received
from an affiliate for which the affiliate does not seek
compensation.
-
The recipient NFP should recognize all personnel
services received from an affiliate at the cost incurred
by the affiliate.
The personnel services received from an affiliate must
directly benefit the recipient NFP in the way that is
similar to the way in which benefit is gotten from
personnel directly engaged by the recipient NFP.
22
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
FASB Votes to Discontinue Loss Contingencies
Project
 Project was undertaken to address concerns that the
current disclosures about certain loss contingencies
do not provide sufficient and timely information about
the likelihood, timing and amounts of cash flows
associated with loss contingencies
 The FASB issued Exposure Drafts in 2008 and 2010
-
The changes proposed were strongly opposed by non-user constituents
Common belief that additional disclosures could be prejudicial to the
reporting entity
 After long period of inactivity, the FASB voted to remove the
controversial project from its technical agenda at the July 2012
meeting
23
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
FASB Attempts to Redefine Nonpublic Entity
 The FASB Project, “Definition of a Nonpublic
Entity”, is re-examining the definition of a
nonpublic entity
-
Focus is on defining what constitutes a private company in order to
• Distinguish between different types of entities for standard
setting purposes and
• Determine which companies are to be included in the scope of
the Private Company Decision Making Framework
 FASB has currently decided that the following types of
entities should not be included in the definition of a private
company
-
-
SEC filers
For-profit entities that are conduit bond obligators that are traded in
the public market
EB Plans
24
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
OMB Advance Notice of Proposed Guidance
 Reform of Federal Policies Relating to Grants
and Cooperative Agreements; cost principles
and administrative requirements (including
Single Audit Act)
 Issued February 2012
 Comments due April 30, 2012
 Final Version?
25
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
OMB Advance Notice – Key Provisions
 Increase minimum threshold for audit to $1
million
 Add second tier for audit of awards between $1
million and $3 million
-
Only audit allowable costs and one additional
requirement
 Full scope single audit if over $3 million
 Consider reevaluating applicable (universal)
requirements
26
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
OMB Advance Notice – Key Provisions
 Coordination of audit resolution activities
among agencies
 Consolidation and clarification of cost
principles
 Consolidation and clarification of administrative
requirements
27
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
Questions??
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
For Additional Information Contact:
Michelle Horaney, Partner
McGladrey LLP
201 N Harrison St., Suite 300
Davenport, Iowa 52801
[email protected]
Direct 563.888.4038
For more information on McGladrey’s Education practice visit
http://mcgladrey.com/Industries/Education
29
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.
McGladrey LLP is the U.S. member of the RSM International (“RSMI”) network of independent accounting, tax and consulting
firms. The member firms of RSMI collaborate to provide services to global clients, but are separate and distinct legal entities
which cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any
other party.
McGladrey, the McGladrey signature, The McGladrey Classic logo, The power of being understood, Power comes from being
understood and Experience the power of being understood are trademarks of McGladrey LLP.
© 2012 McGladrey LLP. All Rights Reserved.
McGladrey LLP
201 North Harrison St, Suite 300
Davenport, Iowa 52801
563.888.4000
800.274.3978
www.mcgladrey.com
©
© 2012
2012 McGladrey
McGladrey LLP.
LLP. All
All Rights
Rights Reserved.
Reserved.