Cash flow classification for donated securities that are liquidated upon receipt

April 20, 2012, 4:14 pm

A nice clarification from the EITF…

One of the fuzzy places in the accounting literature for nonprofits is how to handle donated securities that are liquidated when they are received.

Here is the approach that most organizations take – Since they are not in the business of the investing in the stock market they transfer donated securities to their broker and liquidate them in an orderly manner.

How should those be presented on the cash flow statement? There’s divergence in practice, but I think the most common way is to reflect the liquidation has an investing inflow.

Exposure draft from the FASB will make the presentation consistent.

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