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Question 1

ASU 2016-14 stipulates a number of disclosures required for underwater endowment funds. Which of the following is not one of the required disclosures?

Total original endowment gifts or levels required to be maintained by donor stipulation or law

The aggregate amount of the fair value of underwater endowment funds

Comparison of underfunded versus overfunded endowment funds

The NFP’s policy, and any actions taken during the period, concerning the appropriation of underwater endowment funds

Answer 1

Comparison of underfunded versus overfunded endowment funds

A comparison of underfunded versus overfunded endowment funds is not a required disclosure.

Required disclosures do include the governing board’s interpretation of the relevant state UPMIFA law as to its ability to spend from underwater endowment funds; the not-for-profit entity’s (NFP’s) policy, and any actions taken during the period, concerning the appropriation of underwater endowment funds; the aggregate amount of the fair value of underwater endowment funds; the total original endowment gifts or levels required to be maintained by donor stipulation or law; and the total amount of funds’ deficiencies.

Question 1

Notes to Financial Statements

Answer 1

Notes are pieces of information disclosed in notes added to the end of financial statements, or parenthetically on the face of the financial statements, which amplify or explain, and are essential to the understanding of information recognized in the financial statements. Notes are considered integral parts of the financial statements prepared in accordance with GAAP. (SFAC 5.7)

Information presented in notes includes the following:

• Significant accounting principles used
• Alternative measures for assets and liabilities
• Information about long-term obligations (when due, the interest rate, restrictive covenants)
• Inventory measurement method used (LIFO, FIFO, etc.)
• Revenue recognition policies
• Discussion of contingencies, claims, and assessments

Question 2

Not-for-Profit Entity

Answer 2

According to the FASB ASC Glossary, a not-for-profit entity is distinguished from a business entity by three characteristics: contribution of significant resources from providers who do not expect proportionate return, operating purposes other than to provide goods or services for profit, and absence of ownership interests like business enterprises. In addition, the IRS stipulates that no part of the organization’s net earnings can inure for the benefit of any specific person or persons.

FASB ASC Glossary

IRS Form 1023

AICPA Audit and Accounting Guide Not-for-Profit Entities, Section 15.09

Question 3

Underwater Endowment Fund

Answer 3

An underwater endowment fund is a donor-restricted endowment fund for which the fair value of the fund at the reporting date is less than either the original gift amount or the amount required to be maintained by the donor or by law that extends donor restrictions.

FASB ASC Glossary

Question 4

2124.10

Answer 4

Underwater Endowment Funds

Required disclosures for underwater endowment funds include the following:

The governing board’s interpretation of the relevant state UPMIFA (Uniform Prudent Management of Institutional Funds Act) law as to its ability to spend from underwater endowment funds
The not-for-profit entity’s (NFP’s) policy, and any actions taken during the period, concerning the appropriation of underwater endowment funds
The aggregate amounts of the following items:
Fair value of underwater endowment funds
Original endowment gifts or levels required to be maintained by donor stipulation or law
Amount of funds’ deficiencies (that is, (1) less (2))

Question 5

ASU 2016-14