By: Annmarie Novotney, CPA, Director
Earlier this year, several members of our Blue & Co. Not-for-Profit Services Team attended the 2022 AICPA Not-For-Profit Industry Conference. The annual conference covers key accounting, auditing, and tax issues as well as emerging updates related to the not-for-profit industry. This conference is extremely helpful to both industry professionals and practitioners in providing knowledge and updates needed to navigate the ever-changing landscape.
Below are some of the key takeaways our team brought back from this year’s conference:
Upcoming Accounting Standard Updates (ASUs):
- ASU 2016-02, Leases (Topic 842) is already effective for public business entities, including Not-for-Profits (NFPs) that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or over-the-counter market (otherwise known as public NFPs). For private companies and all other NFPs, the effective date is fiscal years beginning after December 31, 2021, (i.e., calendar year 2022 for private entities with a December 31 year-end). Early adoption is permitted.
- We have been talking about this standard for years; if you have not yet started to assess your leases and consider implementation, the time to start is now. If you haven’t downloaded our comprehensive Lease Implementation Guide, it can be found here, free to download- https://www.blueandco.com/services/assurance-services/lease-standard/
- ASU 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets should be applied on a retrospective basis and are effective for annual periods beginning after June 15, 2021, (i.e., fiscal year 2021-22 for June year-ends; calendar year ending 2022 for December year-ends). Early adoption is permitted.
- This ASU does not change the existing accounting for recognizing and measuring gifts-in-kind. However, this ASU will require more prominent presentation of contributed nonfinancial assets and enhance disclosures around the valuation of those contributions and their use in programs and other activities.
- ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments will be effective for NFPs for fiscal years beginning after December 15, 2022, (i.e., calendar year 2023 for December 31 year ends). Early adoption is permitted.
- Previously, incurred losses were measured at the reporting date and impairment was recognized when it was probable. With this new standard, expected losses are now measured over the contractual life of the asset. The new expected loss model will use the past (historical data), present conditions, and future estimates (reasonable and supportable forecasts) to estimate losses.
- Scope for NFPs includes:
- Trade receivables resulting from exchange transactions
- Notes receivable and other loan commitments
- Lease receivable recognized by a lessor
- Excluded from this standard are:
- Promises to give (pledges)
- Loans and other receivables between related entities under common ownership
Please reach out to us if you have questions about the implementation of these new standards.
Cryptocurrency and Digital Asset Accounting:
Cryptocurrency and other digital assets are still a relatively new concept in the NFP industry. A common question recently has been how they should be accounted for under U.S. generally accepted accounting principles (U.S. GAAP). While there is currently no authoritative literation under U.S. GAAP which specifically address the accounting for digital assets, including digital currencies, the AICPA has issued some guidance.
Since digital asset mediums are not considered financial assets under current guidance as they are not tied to ownership of actual underlying assets, the AICPA has suggested that these fall under the guidance of Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, which covers indefinite life intangible assets and should be recorded as such on the financial statements. Such intangibles will need to be considered annually at a minimum for impairment and any future appreciation to the asset balance will not be recognized until the asset is sold. However, if digital assets are held separately by an investment company as part of investment portfolio offerings, the guidance recommends those assets are within the scope of ASC 946, Financial Services – Investment Companies, and recorded at fair value with related investment disclosures.
- The 2022 OMB Compliance Supplement was released on May 11, 2022, and is effective for audits of fiscal years beginning after June 30, 2021.
- On April 4, 2022, the federal government stopped using the DUNS Number to uniquely identify entities. Now, entities doing business with the federal government are required to use the Unique Entity ID created in SAM.gov. They no longer have to go to a third-party website to obtain their identifier. This transition allows the government to streamline the entity identification and validation process, making it easier and less burdensome for entities to do business with the federal government.
- Single audit filers require submission regarding your federal awards to the Federal Audit Clearinghouse. On October 1, 2023, the Federal Audit Clearinghouse provider will change from Census to the General Services Administration (GSA).
- Single audits with a fiscal period ending in 2022 (or earlier) will continue to use Census, which will remain open for a limited period of time after September 30, 2023. Single audits with a fiscal period ending in 2023 will have to be submitted under the new provider GSA, which means those submissions will not begin until October 2023.
- As it relates to Single Audit findings, one of the most common areas of issues continues to be lack of required policies in formalized, written form.
Your Blue & Co. team is here to assist as you work through any questions on these updates.