The American Institute of CPAs (AICPA) has issued non-authoritative guidance on the definition of direct care of collections to help nonprofits implement the Financial Standards Accounting Board (FASB) Accounting Standards Update No. 2019-03.
“The requirements of the new FASB standard provide latitude in the way an entity with a collection chooses to spend the proceeds from sales of those items, by permitting the proceeds to be used for direct care of existing items,” said Christopher Cole, CPA, CFE, CFF, CGMA, associate director, of the AICPA’s Not-for-Profit Section.
The term “direct care” is not defined in the FASB Accounting Standards Codification (ASC). The FASB decided that an industry should be able to determine what it considers direct care, rather than FASB defining it.
Some stakeholders raised concerns that the Codification’s Master Glossary definition of collections is different from other sources of non-authoritative guidance. FASB ASU 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections, requires that the use of “proceeds from [collection] items that are sold to be for the acquisition of new collection items, the direct care of existing collections, or both.”
The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 431,000 members in 137 countries and territories, and a history of serving the public interest since 1887.
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