FASB adds GIK project to technical agenda. Focus will be only disclosure and presentation on statement of activity. Will not address valuation methodology.

FASB decided to address disclosures for donated meds but not valuation. Image courtesy of Adobe Stock.

On October August 21, 2019, FASB held an open meeting to address the GIK issue.

You can watch the meeting video for yourself:


Discussion of GIK starts about the 44 minute point.

The direction the board is taking is to consider enhanced disclosures in the notes and more detailed presentation on the statement of activity. The board decided to not address measurement, i.e. valuation methodology.

If you are an auditor working with not-for-profit organizations, you may enjoy watching the meeting to learn about FASB’s procedures in addition to seeing the discussion unfold.

In my opinion, the only other people who might get much out of the meeting are regulators, who might be curious whether the FASB’s efforts will end up with a result that is in the ballpark of the concerns held by regulators. Using that baseball analogy, my wild guess is that a number of regulators will probably consider that the result not only won’t end up in the right ballpark, but may not even land in the same country or even on the same continent.

The GIK advisory group now consists of two auditors, one valuation specialist, three preparers, three regulators, and one independent charity watchdog. This is a minor change from previous participation, which was three auditors, three preparers, and three regulators.

Extent of concerns by state regulators

It would seem there is far more concern among the various state AGs that than is visible in public discussion.

Rick Cole, a FASB staff member, reported briefly on the California AG enforcement action and proposed legislation in the state.  He said “(t)he FASB staff has heard other states share this view (i.e. overvaluation of GIKs) but are waiting to see how this is resolved with California before considering proceeding with their own actions, including potentially their own legislation.”

I think that means other states, number unknown, are considering legislation on point.

He also said some other states are concerned about the transparency of the GIK reporting.

He did not specify the number of states with each level of concern or any names.

Board discussion and conclusions

All the board members agreed to move the issue from research project to the technical agenda.

In discussion there was an intriguing conceptual conversation of how to set scope. Concern is to avoid addressing just one specific transaction, i.e. donated meds. Board wants to address a broad concept rather than detailed specifics.

Consensus evolved in direction of addressing all non-financial GIK instead of just donated meds or even meds plus medical devices.

Board set scope at all non-financial GIK.

During the discussion, there evolved much stronger support for disclosure changes than valuation changes. I don’t recall any board member who spoke in favor of revisiting measurement issues.

Staff floated idea of separate, more extensive disclosures when funding is “predominantly” from GIK. The new definition presented was predominantly means over 50% of revenue is GIK. That idea got a poor reception from the board members. Instead, several board members pointed out the concept of materiality should drive what disclosures are needed.

Discussion proceeded on whether to address disclosure, presentation in financials, valuation, or some combination thereof.

Consensus developed to improve transparency around GIK, including presentation on statement of activity and disclosures. Board does not want to open up measurement, i.e. valuation methodology. Several board members explicitly said they were hesitant to open up valuation issues.


To wrap up the discussion, at around the 1:44 mark, the Chairman, Russ Golden, summarized the issue. After saying the board will add the project to the technical agenda he explained:

“I don’t hear board members wanting to rethink the measurement philosophy associated with gifts in kind, but I sense (what we want is for the) … project’s objective to focus on increasing the transparency around non-financial GIKs including disclosures and presentation. We also want to look at the need for educational guidance to improve the quality of the application of the existing measurement guidance as well as any transparency improvements the board makes.”

Staff was asked to work with NAC to determine what presentation and disclosure improvement might be appropriate and bring those ideas back to the board in October.

The scope includes all non-financial GIKs. The changes to be considered will only involve enhanced disclosures and more detailed presentation on the statement of activity.

Anyone have other thoughts on the meeting?

Implications of other states watching this legislation

Update: Have been pondering what it means that other state regulators are waiting to see if this law passes before considering what actions they may take, to include advocating for legislation.

Does that mean:

  • If the bill passes other states won’t need to take additional action since charities will likely change reporting in their general purpose financials?
  • If the bill passes, other state regulators will see it is possible to get a legislative solution (presumably also with essentially zero opposition by legislators) and will then try to do so themselves?
  • If the bill fails, other states will need to take action, to include possible legislation, to force charities to adopt more appropriate valuation?
  • If the bill fails, other states won’t take action since it wasn’t possible to get a bill passed in California?
  • Regardless of outcome, will other states use final version of AB1181 as a template for their own legislation (assuming it passes)?

Anyone have thoughts on why other states are watching from the batter’s box (to continue the baseball analogy)?

Ponder the implications, and depth of concern, that other states are lined up to take additional enforcement actions.

Do you suppose, just maybe, possibly, perhaps, that a whole bunch of regulators have serious problems with the GIK accounting currently in place? Is it possible that we in the profession have missed our last chance to fix the issue on our own?

Update: If you want to read the technical description of what is written above, you can check out the FASB’s Tentative Board Decision. Note the scope does not include measurement, which means changes to valuation are off the table. The directions given to staff who will draft any changes:

The objective of the project is to provide additional transparency in the reporting of GIKs through potential enhancements to presentation and disclosure.

Leave a Reply

Your email address will not be published. Required fields are marked *