Updated accounting standards issued for nonprofits

• Date: 01 October 2016
• Published date: 01 October 2016
• DOI: http://doi.org/10.1002/nba.30236

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(See STANDARDS on page 2)

Data shows paltry returns

for foundation endowments

Data gathered in the 2015 Council on Founda-

tions – Commonfund Study of Investment of En-

dowments for Private and Community Foundations

show that private foundations reported an average

return of 0.0 percent for the 2015 scal year, down

from the 6.1 percent return reported for FY2014,

while participating community foundations reported

an average annual return of –1.8 percent compared

with 4.8 percent for FY2014.

Despite this, however, the effective spending rate

remained unchanged at an average of 5.1 percent

for all participating foundations, the report showed.

According to Vikki Spruill, president and CEO

of the Council on Foundations, the study conrms

that foundations are continuing to invest in their

missions and maintain consistent spending. But if

the low rates of returns continue, that consistency

might be in jeopardy.

“Two years of low investment results have reduced

foundations’ trailing 10-year returns to the 5.1–5.9

percent range. Without higher long-term returns,

it will be difcult for foundations to maintain their

endowments once annual spending, ination, and in-

vestment management costs are taken into account,”

Spruill said in a joint statement with William Jarvis,

executive director of the Commonfund Institute.

To read the report in full, go to http://www.cof.org. ■

Updated accounting standards

issued for nonprots

statements as just a vehicle to report history.”

The ASU covers several key components of nonprot

nancial statements, including:

• Net asset classication. According to the FASB,

the updated standard:

• Replaces the existing three classes of net assets

(unrestricted, temporarily restricted and permanently

restricted) with two new classes of net assets—net assets

The Financial Accounting Standards Board has

nalized its Accounting Standards Update for nonprof-

its, incorporating a series of changes the organization

says will enable charities to provide greater clarity and

transparency in their nancial statements and allow for

better comparability from group to group—beneting

a whole host of end-users of those statements, includ-

ing creditors, donors, grantors, trade associations and

other industry groups.

According to Lee Klumpp, national assurance direc-

tor for the nonprot and education industry division at

accounting rm BDO and member of the FASB’s Not-

for-Prot Advisory Committee, the updated standards

are good for the nonprots affected by them, even if

they might not see it that way at rst.

“There’s often an initial resistance to change,”

Klumpp said. “But this is an opportunity for nonprof-

its to be catalysts for progress, taking their nancial

statements to a higher level and making them a better

resource for communicating accomplishments and

outcomes to stakeholders instead of using nancial

Vol. 325 October 2016