Non-profit organizations should report a bottom line that says how well they are doing financially just as a profit-making business does, says Robert Anthony, a past Financial Accounting Standards Board committee member.
Speaking at the annual Intermountain Accounting Seminar at Utah State University, Anthony took the Financial Accounting Standards Board (FASB) to task for saying non-profit organizations should consider contributions as part of operating expenses.The FASB is an accounting profession-funded board that is attempting to set standards for the entire accounting industry.
"The FASB implies that endowments, which are capital contributions, and operating expenses can be mixed, and I don't think they can, so the FASB is plain wrong to start with," said Anthony, a former assistant secretary of defense who is also a professor emeritus at Harvard.
Anthony said the FASB would call contributions revenue. He continued that this is misleading since contributions establishing endowments cannot be spent for operating costs.
Sponsored by the USU Partners Program, the Utah Association of CPA's and the USU chapter of Beta Alpha Psi accounting fraternity, the annual seminar focused this year on accounting standards and self-regulation.
Anthony challenged the 320 accountants attending the seminar to tell the FASB to change its thinking about treating capital contributions to non-profit organizations as revenue.
"I think non-profit organizations should list capital contributions in a separate financial statement, and that should be the only difference between non-profit and profit-making businesses' financial statements," he said.
"If a non-profit organization is given a building, there is no increase in revenue so the operating revenue statement can't reflect any, but the FASB would require you to show it as depreciation, which would be a loss of revenue, but in this case there would be no loss," he said.