Not-for-Profit Advisory Committee agrees with FASB there is no need to change how donated medicine is valued.

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On 9/27/19 FASB sent out a FASB Action Alert. These are sent to people who sign up for various newsletters from FASB. This one is titled Not-for-Profit Advisory Committee Meeting Recap and summarizes their meeting on September 16 & 17, 2019.

This committee is referred to as NAC. They meet twice a year.

Main topic of discussion, based on the notes, was the FASB’s project on Not-for-Profit Reporting of Gifts-in-Kind.  You can keep track of the project by checking that web page.

I will quote several of the key comments in the email and summarize other comments:

NAC generally agreed that additional disclosure might be helpful to readers of financial statements.

Meaning of the following paragraph is that NAC concurs with FASB’s scope decision for this project to address presentation and disclosure and exclude any consideration of valuation:

Members generally agreed with the current scope of the project, which is limited to nonfinancial GIKs, although some Committee members questioned whether certain types of GIKs, such as donated volunteer services, should be excluded from the scope, except possibly to align the disclosure requirements for donated services with those proposed for other nonfinancial GIKs.

My translation of that paragraph in context of the cease and desist orders, hearing in front of the administrative law judge, and AB 1181:  Neither FASB nor NAC are going to address the primary, focused concern of the AG and California legislature, which is how donated medicines are valued.

A range of possible presentation options on the statement of activity were discussed:

Committee members discussed possible alternatives for presentation requirements, including disaggregation of GIKs as separate line items or subtotals on the face of the financial statements. Members generally indicated that a requirement for separate line item presentation of GIKs revenue, apart from cash contributions, on the face of the financial statements, with additional note disclosures, may provide users with the most useful information and should not result in a significant cost for preparers.  While Committee members indicated that they had seen some NFPs likewise break out GIKs-funded expenses, some members questioned the incremental information content of separate presentation of GIKs expenses, especially if separate presentation of GIKs revenue was combined with disclosure of GIKs in inventory. …

NAC also discussed possible disclosures, but is concerned additional requirements could cost too much time and effort:

Committee members discussed potential quantitative and qualitative disclosure requirements for GIKs of nonfinancial assets. Members generally supported: (1) quantitative disclosures disaggregating GIKs revenue by type of GIK (such as food, pharmaceuticals, or clothing), (2) enhanced information about key inputs and assumptions in the valuation of GIKs by type of GIK (at the level of disaggregation), and (3) qualitative information about donor restrictions affecting the use of GIKs in an NFP’s programs or other activities. As with presentation, and for many of the same reasons, Committee members expressed concern about cost and complexity, especially for smaller NFPs, in requiring disaggregated disclosures about GIKs-funded expenses or disclosure of GIKs in ending inventory.

There is a split in opinion whether any additional educational efforts would be worthwhile.

The impact, for anyone just tuning in to the issue who has not already figured it out, is that allowing FASB time to address the concerns of the AG and legislature will not result in any changes in accounting that address the concerns of the AG and legislature.

In the exquisitely unlikely event that there is anyone who still has ears to hear, please consider the implications of that comment. Please.

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