FASB ACCOUNTING STANDARDS UPDATE NO. 2012-05

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By Brian Albrinck – Staff Accountant

The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) No. 2012-05, Statement of Cash Flows (Topic 230): Not-for-Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows.

The new provision addresses the classification of cash receipts arising from the sale of certain donated financial assets in the statement of cash flows for not-for-profit entities. The ASU requires not-for-profit organizations to "...classify cash receipts from the sale of donated financial assets consistently with cash donations received in the statement of cash flows if those cash receipts were from the sale of donated financial assets that upon receipt were directed without any NFP-imposed limitations for sale and were converted nearly immediately into cash."

The ASU requires a donated financial asset that is immediately converted to cash be treated the same as donated cash and thus included in operating activities in the Statement of Cash Flows. If the donor restricts the use of the donated financial asset to a long-term purpose the cash receipts should be classified as cash flows from financing activities. In any other case the cash receipts from the sale should be classified as cash flows from investing activities.

The amendments in this update are effective prospectively for financial statements issued for fiscal years, and interim periods within those years, beginning after June 15, 2013. Retrospective application to all prior periods presented upon the date of adoption is permitted. Early adoption is permitted.

For the complete text of this and other ASUs, click here.