The document summarizes upcoming accounting changes that may affect not-for-profit organizations, including changes to audit requirements for federal awards, fair value disclosures, debt issuance costs presentation, revenue recognition, leasing standards, and not-for-profit financial statement presentation. Key dates for implementation of these changes include December 31, 2015, 2016, 2017, 2018 and later. Organizations should monitor new accounting rules and guidance as special circumstances could impact their financial reporting.

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documenting internal controls under the latest COSO
guidance. The changes to the audit requirements kick
in December 31, 2015, and later.
Some organizations may find that the outside audit
process is somewhat streamlined in terms of how
many programs need to be audited. The threshold
for a single audit has increased to those entities with
more than $750,000 of federal expenditures (the
previous threshold was $500,000). Additionally, the
guidance increases the threshold for Type A/B Major
Program determination. Percentage of coverage also
dropped for entities now covering 20-40 percent of
funds, depending on the auditee. All of these factors
might lead, in some cases, to fewer major programs
being selected. This could result in some savings in
terms of audit fees, or could at least offset some of
the other items related to the outside audit of federal
awards. We encourage you to talk to your auditor
about the impact of these changes on your entity.
For more detail about the changes click on OMB Makes
Sweeping Changes to A-133 Audit Requirements.
Disclosures about Fair Value Levels of Investments
Accounted for under the Net Asset Value (NAV) per
Share Method
This standard requires that the investment amounts
accounted for under the NAV method be removed
from the leveling tables in the fair value hierarchy. The
We remain in a relatively quiet time for changes in
accounting and reporting standards affecting not-for-
profit organizations, notwithstanding larger proposals
affecting the intermediate and longer term. Some
of the near term changes are essentially tweaks
to ensure organizations are following standards
with consistency rather than having the diversity
in practice that can sometimes arise. Despite not
having any major changes to report, we encourage
all organizations to pay close attention to all new
accounting rules as they may find themselves in a
special or unique circumstance that could affect their
reporting.
Items Affecting December 31, 2015 and Later
Year Ends
OMB Audit Requirements
The Uniform Grant Guidance released by the Office
of Management and Budget (OMB) and the Council
on Financial Assistance Reform (COFAR) at the end
of 2013 consolidates rules and eight OMB Circulars,
including A-133. Changes are mainly designed to
focus on larger, riskier programs. Organizations
generally had to apply the new requirements for cost
principles and administrative requirements for new
funding received after December 26, 2014, including
December 2015
A Not-for-Profit’s Guide to Upcoming Accounting Changes

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FASB made this change due to confusion in current
practice. NAV investments are effectively categorized
under the current fair value hierarchy based on speed
of redemption versus valuation method. Although
many users had adopted their footnotes to describe
this, others did not. Additionally, the standard and
users often associate levels within the fair value
hierarchy as an indicator of risk, but that has not been
the case with NAV investments, which for most not-for-
profits represent the bulk of level 2 and 3 investments.
These standards are required to be adopted in
public entities for years beginning after December
15, 2016 and for private entities for years beginning
after December 15, 2017. For most organizations, this
should be a simple evolution of presentation in the
footnotes and early adoption is encouraged.
For more information about these changes, click on
Classification & Disclosure of Fair Value Hierarchy No
Longer Required for Qualifying Investments.
Private Entity Alternative for Accounting for Certain
Interest Rates Swaps
Private entities have a simplified hedge accounting
approach to use for interest rate swaps in select
scenarios. The practical expedient allows these
entities to use cash flow hedge accounting for swaps
that are created to economically convert variable
rate interest payments to fixed rate payments. The
approach assumes no ineffectiveness and allows for
income statement charges for interest that are similar
to the amount that entity would have incurred if it had
initially entered into a fixed-rate form of borrowing.
The alternative took effect for annual and interim
periods after December 15, 2014. The bad news is
many not-for-profits are considered public entities
under the standards, and thus this benefit is not
available to many organizations.
For more information, click on Accounting for Interest
Rate Swaps for Private Companies Simplified.
Items Affecting December 31, 2016 and June
30, 2017 Year Ends
Presentation of Debt Issuance Cost
In fiscal years beginning on or after December 15,
2015, entities must present debt issuance as a
direct deduction from the carrying amount of debt
rather than an asset. Many organizations currently
present debt issuance costs as an asset. This may
result in a reduction of total assets for entities that
have capitalized debt issuance costs. Public business
entities must also implement the change for interim
periods within fiscal years after December 15, 2015,
but private entities won’t have to implement the change
for interim periods until on or after December 15,
2016. Given that there is sometimes less clarity about
which entities meet the public test, we suggest that all
entities consider making these simple presentational
changes at your next fiscal year end reporting period.
For more information about the changes, click on
Presentation of Debt Issuance Cost Simplified.
Accounting for Fees Paid in a Cloud Computing
Arrangement
Entities will now have guidance to determine whether
a cloud computing arrangement includes the sale or
license of software. When a license is involved, the
entity accounts for the software license in a similar
manner to other software licenses. Arrangements
with no licenses should be accounted for as a service
contract.

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Public entities will adopt the requirement for fiscal
years and interim periods beginning after December
15, 2015. Nonpublic entities will adopt for fiscal years
after December 15, 2015 and interim periods within
fiscal years after December 15, 2016. Early adoption
is permitted. Learn more about the standard here.
Items Affecting December 31, 2017 Year Ends
and Later
Practical Expedient Employee Benefit Plan
Measurement Date
A practical expedient is available for those entities
with fiscal year ends that do not coincide with the end
of the month. Entities may use the nearest month end
to their fiscal year end to measure defined benefit plan
assets and obligations. Once adopted, the practical
expedient must be used for all plans. If a contribution
or significant event would occur between the month
end and the fiscal year end, the entity must adjust the
measurement of plan assets.
Public entities will adopt the requirement for fiscal
years and interim periods beginning after December
15, 2015. All others will adopt for fiscal years after
December 15, 2016, and interim periods within fiscal
years after December 15, 2017. Early adoption is
permitted.
For more information, click on Practical Expedient
Created for Defined Benefit Plans.
Not-for-Profit Financial Statement Presentation
The FASB is evaluating how to streamline the
financial statement presentation for not-for-profits
and healthcare entities. It released an exposure
draft in 2015 that proposed reducing the number of
net asset classes from three to two, modifying the
statement of activities and changing the presentation
of cash flows. The FASB also wants not-for-profit
organizations to disclose more information about
their liquidity. Comments on the proposed changes
were due August 20, 2015. On October 28, 2015, the
FASB met and decided to split the project into two
phases. The first phase will reconsider items that are
not dependent on other accounting projects and are
improvements FASB believes can be finalized in the
near term. Such items include net asset classification,
reporting of expenses, improving disclosures of
information useful in assessing liquidity and operating
measures and changes to the cash flow statement.
The second phase is likely to require more time to
resolve due to similar topics being addressed in
other projects, particularly related to the proposed
operating measure laid out by the proposal as well as
the realignment of certain line items on the cash flow
statement. The FASB hopes to get final guidance out
on the first phase by June 30, 2016, and no specific
timeframe has been noted for implementing final
guidance. We expect that final guidance may not be
issued until December 31, 2018 or later. For more
information about these changes click on:
Not-for-Profit Financial Statement Presentation
Update
Not-for-Profits Brace for Enhanced Disclosure and
Reporting Requirements
Revenue Recognition
Revenue recognition changes can impact not-for-
profit entities that have transactions that meet the
definition of a contract with a customer. In 2015,
the FASB officially delayed the implementation date
by one year. Now, public business entities, certain
employee benefit plans and not-for-profit entities
that have issued or are a conduit bond obligor

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM auditor to further discuss the impact on your audit or audit report.
for securities that tracked, listed or quoted on an
exchange or over-the-counter market, are required
to adopt the new guidance by fiscal years beginning
on or after December 15, 2017. All other entities are
required to adopt by fiscal years beginning on or after
December 15, 2018, and interim fiscal periods after
December 15, 2019. The FASB continues to work on
multiple proposals to streamline the implementation
and application of the standard.
Many not-for-profits will need to take a closer look
at the guidance to determine if they need to plan for
these changes. For some organizations, this will entail
conducting an evaluation of the revenue streams in a
carefully documented way in to ensure they align with
the standards. The guidance excludes contribution
transactions and the effect of earnings on various
investment type securities, but for many not-for-profits
there are substantial earned revenues or sponsored
arrangements that may need review.
For more information about these changes, click on:
Narrow Scope Improvements Proposed to Revenue
Recognition Guidance
Principal Versus Agent Changes Proposed to Revenue
Recognition Standard
FASB Approves Revenue Recognition Deferral
Lease Accounting
The FASB voted on November 11, 2015, to move
forward with a long-awaited and much debated
standard that would require organizations to include
lease obligations on their balance sheets when they
enter a lease with a corresponding right of use asset.
Public business entities will need to follow this method
for years beginning December 15, 2018, and later,
and private entities will need to follow the standard
for fiscal years beginning December 15, 2019, and
later. There are still some steps to take place before
the final standard is published, which is expected to
take place in early 2016. The challenge here will be
planning for the conversion as all operating leases will
need to be examined for retroactive application. The
application would require entities to follow the new
standard as though it were in place in prior reporting
periods, which is expected to make the application of
this standard a notable effort.
For more information on the proposed leasing
standard, click on FASB to Draft Final Leasing
Standard Update.
For More Information
If you have specific comments, concerns or questions
about the accounting changes on the horizon, please
contact Michelle Spriggs of the MHM Professional
Standards Group. Michelle can be reached at
mspriggs@cbiztofias.com or 774.206.8336.