Not-for-Profit Organizations

Status: Amendments to the 4400 series of Handbook Sections approved, subject to written ballot.

The AcSB has approved proposed amendments to several of the standards in the 4400 series of Handbook Sections, subject to written ballot. However, the AcSB decided not to proceed with proposed amendments to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations, pending the outcome of its deliberations on the future basis for setting standards for the not-for-profit sector.

Background
Activities to Date
Next Steps
Related Information
Contact Information

Background

In October 2003, the AcSB approved a project to review and update accounting standards applicable to not-for-profit organizations (NFPOs).   The 4400 series of the Handbook was issued in 1996 and made effective for fiscal years beginning on or after April 1, 1997. Since that time, there have been amendments to other Sections that parts of the 4400 series were based on. Some of these amendments were not made to the corresponding Section in the 4400 series, as that series had recently been issued and a decision had been made to minimize the changes being made to it.  The Not-for-Profit Organizations Advisory Committee (AdCom) has reviewed changes made to the Handbook since 1996 and has considered the ramifications for NFPOs of current AcSB projects.

Activities to Date

The Not-for-Profit Organizations Advisory Committee (AdCom) considered the following specific areas:

• guidance to assist NFPOs with accounting and reporting issues arising from the application of the Financial Instruments standards;
• improvements that might be made in the deferred contributions continuity schedule and the presentation of deferred contributions;
• whether any Recommendations in Section 4430, Capital Assets Held by Not-for-Profit Organizations, can be removed and replaced by references to Section 3061, Property, Plant and Equipment; and
• whether the Not-for-Profit Financial Reporting Guide should be updated and reissued, and whether any information included in the Guide should be incorporated into the 4400 Series.

These matters are all being considered in the context of AcSB’s Strategic Plan.

In March 2007, the AcSB approved, for exposure, proposals made by the AdCom to amend the following existing standards or parts of the Handbook:

• Introduction to Accounting Standards that Apply Only to Not-for-Profit Organizations:
  Cross-reference the Introduction to Section 1100, Generally Accepted Accounting Principles, thereby reminding readers that Accounting Guidelines and EIC Abstracts are applicable to NFPOs.
• Section 4400, Financial Statement Presentation by Not-for-Profit Organizations:

  —	Make Section 1540, Cash Flow Statements, applicable to NFPOs.
  —	Make the disclosure of net assets invested in capital assets optional — if presented, it may be either in a note to the financial statements or directly on the face of the statement of financial position.
  —	Limit the reporting of certain revenues net of expenses in the statement of operations.

• Section 4430, Capital Assets Held by Not-for-Profit Organizations:
  Amend Section 4430 to clarify that the size test for relief from the Section is intended to allow NFPOs to expense, rather than capitalize and amortize, their capital assets.  It is not intended to allow NFPOs to choose to capitalize but not amortize their capital assets, nor is it intended to allow different methods of accounting for various types of capital assets.
• Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations
  Amend Section 4450 to clarify the material related to the identification of control, particularly as it relates to other not-for-profit organizations, and require controlled entities to be consolidated; amend the economic interest definition; enhance the disclosure requirements for economic interest relationships; and eliminate the exemption from consolidation of a large number of individually immaterial organizations.
• Section 4460, Disclosure of Related Party Transactions by Not-for-Profit Organizations: Amend paragraph 4460.02 to be consistent with Related Party Transactions, paragraph 3840.02.  
• Section 1751, Interim Financial Statements: Expand the scope of Section 1751 to make it applicable to all entities, not just profit-oriented enterprises. 
• Proposed new Section, Disclosure of Allocated Expenses by Not-for-Profit Organizations: Require NFPOs to disclose their policy on the allocation of fundraising and general support expenses, the nature of expenses being allocated, the basis on which such allocations have been made, and the amounts that have been allocated in the notes to the financial statements.
      

In May 2008, the AcSB approved proposed amendments to several of the standards in the 4400 series of Handbook Sections, subject to written ballot. However, the AcSB decided not to proceed with proposed amendments to Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations, pending the outcome of its deliberations on the future basis for setting standards for the not-for-profit sector. 

Next Steps

The amendments are expected to be issued in September 2008.

Related Information

• Responses to the AcSB's Exposure Draft are available here (PDF)   

Contact Information

Brian Barrington, CA
Principal, Accounting Standards
Telephone: +1 (416) 204-3436
Fax: +1 (416) 204-3412
Canadian Accounting Standards Board
277 Wellington Street West
Toronto ON M5V 3H2 Canada