Included on that page is another document, Charity Navigator Disclosures. This contains their pro forma disclosure of what changes World Vision believes would have been made to the 2008 and 2009 financial statements if the requirements for SFAS 157 had been applied for those years.
We will leave aside for the moment the opinion of some, including me, that implementing SFAS 157 should have had no impact on the valuation of 500 mg mebendazole, since it is illegal to distribute that medicine in the United States both before and after SFAS 157 went into effect.
The pro forma calculation reduces GIK revenue by $143M in 2008 and $126M in 2009. World vision disclosed in their 2010 CFO’s letter that the 2010 revenue would have been $140M higher using the valuation amounts in place earlier. That amount for 2010 is repeated in the disclosure memo.
The pro forma calculation reduces GIK revenue by 30.5% in 2009 and 39.1% in 2008. Total contributions drop by 10.3% in 2009 and 12.9% in 2008.
I don’t know when the pro forma memo was posted. I have the impression it was in the last month or two. On the other hand, the metadata on the PDF document shows the file was created on October 12, 2012.
The disclosed adjustments
Here are the disclosed pro forma adjustments in the World Vision memo. All amounts in millions:
|FY 08||FY 08||FY 08|
|program service expense||978,648||835,360||143,288|
|FY 09||FY 09||FY 09|
|program service expense||1,065,937||939,864||126,073|
2009 and 2008 amounts as audited and with pro forma adjustments.
I cannot reconcile the disclosed amounts in the memo with the audited financials. There is a $16.7M difference in the 2008 total revenue and $2M in 2009. Thus, I will use the audited amounts.
Here are key amounts for 2010, 2009, and 2008 incorporating the pro forma adjustments already mentioned.
Retrospective evaluation of my previous estimate
On December 28, 2011, I posted Impact of changing rules for determining fair value (SFAS 157) on GIK of NPOs.
In that post I took the disclosed impact on World Vision’s 2010 financial statements from the revised valuation methodology and extrapolated back to the impact on the 2009 financial statements.
Now that we are 14 months down the road and have an official estimate of the impact, it is worthwhile to review my comments back then. (Auditors call this a retrospective review.)
I estimated GIK revenue would drop by $148M, which would be 35.8%. The new pro forma amount is a decline of $126M, or 30.5% of GIK.
Here’s a comparison of my estimate 14 months ago with the current World Vision pro forma.
First, my estimate in late 2011:
Second, the current pro forma from World Vision in early 2013:
You can compare them yourself to see how close or far I was.
Combined impact on 2009 and 2008
In my headline, I reference the combined impact on 2008 and 2009. Could have mentioned the combined impact is over a quarter billion, especially since that seems to be the range of most adjustments to GIK amounts that have been in the headlines lately.
Instead I used a longer and more detailed headline. Hey, I’m a full-time accountant and a very part-time reporter.
Here’s my calculation: