Exempt - Winter 2008 - (Page 7)

All nonproﬁts with board-designated or donor-restricted endowment funds, whether to an enacted version of UPMIFA, must make additional disclosures in their ﬁnancial statements under FAS 117-1 earnings on donor-restricted endowments unrestricted (whether or not appropriated for expenditure by the organization) unless otherwise restricted by donors or by speciﬁc relevant law. As a result of this change, the portion of donor-restricted endowment funds that is not classiﬁed as permanently restricted net assets must now be classiﬁed as temporarily restricted net assets (time restricted) until appropriated for expenditure by the organization. FAS 117-1 states that an appropriation for expenditure occurs upon approval for expenditure. Nonproﬁts affected by this change must restate their ﬁnancial statements by reclassifying certain amounts previously reported as unrestricted to temporarily restricted net assets to the extent they have not already been appropriated for expenditure. fund, showing donor-restricted endowment funds separately from board-designated endowment funds; and, • A reconciliation of the beginning and ending balance of the organization’s endowment, in total and by net asset class, including, at minimum, the following line items (as applicable): investment return separated into investment income (for example, interest, dividends and rents) and net appreciation or depreciation of investments, contributions, amounts appropriated for expenditure, reclassiﬁcations, and other changes. Illustrative examples of these required disclosures can be found in Appendix C of FAS 117-1 on FASB’s Web site, http://www.fasb.org/ APPLICATION AND TRANSITION If an organization initially applies this FSP to donor-restricted endowment funds in existence when UPMIFA is ﬁrst effective, any resulting net asset reclassiﬁcations should be reported on a separate line on the statement of activities for that period, outside a performance indicator or other immediate measure of operations. If an organization initially applies this FSP subsequent to the period in which UPMIFA is ﬁrst effective, the reclassiﬁcation should be reported in those ﬁnancial statements in the earliest comparative period presented for which UPMIFA was effective. If the period in which UPMIFA ﬁrst became effective is not presented, the effects of the reclassification should be reported retrospectively in the earliest period presented. E NEW DISCLOSURES All nonprofits with board-designated or donor-restricted endowment funds, whether or not subject to an enacted version of UPMIFA, must make additional disclosures in their ﬁnancial statements under FAS 117-1. These additional disclosures include: • The governing board’s interpretation of the law(s) underlying the net asset classiﬁcation of the donor-restricted endowment funds; • The organization’s policy for appropriation of endowment assets for expenditure; • The organization’s endowment investment policies, including a description of the organization’s return objectives and risk parameters, how those objectives relate to the organization’s endowment spending policy, and the strategies employed for achieving those objectives; • The composition of the organization’s endowment by net asset class at the end of the period, in total, and by type of endowment Mark J. Piszko is a partner in the Not-forProﬁt Services Division of O’Connor Davies Munns & Dobbins, LLP in New York City. His email is mpiszko@odmd.com Winter 2008 | Exempt | 7 http://www.fasb.org/

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Exempt - Winter 2008

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