2. Amend paragraph 230-10-45-12, with a link to transition paragraph 230-10-65-1, as follows:

230-10-45-12 All of the following are cash inflows from investing activities:

For purposes of this paragraph, receipts from disposing of loans, debt or equity instruments, or property, plant, and equipment include directly related proceeds of insurance settlements, such as the proceeds of insurance on a building that is damaged or destroyed.

3. Add paragraph 230-10-45-21A, with a link to transition paragraph 230-10-65-1, as follows:

230-10-45-21A Cash receipts resulting from the sale of donated {add glossary link to 1st definition}financial assets{add glossary link to 1st definition} (for example, donated debt or equity instruments) by NFPs that upon receipt were directed without any NFP-imposed limitations for sale and were converted nearly immediately into cash shall be classified as operating cash flows. If, however, the donor restricted the use of the contributed resource to a long-term purpose of the nature of those described in paragraph 230-10-45-14(c), then those cash receipts meeting all the conditions in this paragraph shall be classified as a financing activity.

4. Amend paragraph 958-230-55-3, with a link to transition paragraph 230-10-65-1, as follows:

958-230-55-3 When an NFP reports cash received (or cash receipts from the sale of donated {add glossary link to 1st definition}financial assets {add glossary link to 1st definition} that upon receipt were directed without any NFP-imposed limitations for sale and were converted nearly immediately into cash as discussed in paragraph 230-10-45-21A) with a donor-imposed restriction that limits its use to long-term purposes in conformity with paragraph 958-210-45-6, an adjustment is necessary for the statement of cash flows to reconcile beginning and ending cash and cash equivalents.

To report in conformity

For instance, in accordance with Topic 230, such a cash

the

receipt

of a cash contribution

that is restricted for the purchase of equipment shall be reported as a cash flow from financing activities (using a caption such as contributions restricted for purchasing equipment), and it shall be simultaneously reported as a cash outflow from investing activities (using a caption such as purchase of assets restricted to investment in property and equipment or, if the equipment was purchased in the same period, purchase of equipment). An adjustment to reconcile the change in net assets to net cash used or provided by operating activities would also be needed if the contributed asset is not classified as cash or cash equivalents on the statement of financial position. When the equipment is purchased in a subsequent period, both the proceeds from the sale of assets restricted to investment in the equipment and the purchase of the equipment shall be reported as cash flows from investing activities.

5. Add paragraph 230-10-65-1 and its related heading as follows:

230-10-65-1 The following represents the transition and effective date information related to Accounting Standards Update 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:

6. Amend paragraph 230-10-00-1, by adding the following items to the table, as follows:

230-10-00-1 The following table identifies the changes made to this Subtopic.

7. Amend paragraph 958-230-00-1, by adding the following items to the table, as follows:

958-230-00-1 The following table identifies the changes made to this Subtopic.

BC3. NFPs receive donations to operate their programs. Many donations are made in the form of cash, but to accommodate donors, some donations are made in the form of financial assets. Although NFPs typically accept donations in the form of financial assets, many have institutional policies to immediately sell them to convert the financial assets into cash to be available for immediate use. Some NFPs that have such a policy consider those donated financial assets to be essentially equivalent to cash.

BC4. Topic 230 requires entities to classify cash receipts as operating, investing, or financing activities. There is diversity in practice on the presentation of cash receipts from the sale of donated financial assets in the statement of cash flows. Some NFPs classify the cash receipts arising from the sale of donated financial assets in the statement of cash flows as investing cash inflows. Other entities classify the cash receipts from the sale of donated financial assets as either operating cash inflows or financing cash inflows, consistent with their treatment of inflows arising from cash contributions. Some constituents have raised concerns with this diversity in practice.

BC5. At the March 15, 2012 EITF meeting, the Task Force reached a consensus-for-exposure on EITF Issue No. 12-A, “Not-for-Profit Entities: Classification of the Sale Proceeds of Donated Financial Assets in the Statement of Cash Flows.” A proposed Accounting Standards Update was issued on April 17, 2012, with a comment period that ended on July 16, 2012. Fourteen comment letters were received on the proposed Update.

BC6. At the September 11, 2012 EITF meeting, the Task Force considered the comments received on the proposed Update and concluded that the receipt of a donated financial asset and its near immediate conversion into cash is economically similar to the receipt of cash donations. Accordingly, the Task Force also concluded that characterizing the cash receipts from the sale of such financial assets as an investing activity would not provide relevant information about how an NFP obtains cash. Rather, characterizing those receipts as an investing activity might inappropriately suggest a degree of reliance on investing results and investment risks and rewards, which are not present. Because the financial assets in the scope of this Update generally are accepted by the NFP to accommodate the donor's objectives rather than as a result of a strategic decision to invest in a particular entity or asset class, the Task Force does not consider the cash resulting from those transactions to be investing activities in the way that the statement of cash flows characterizes such activities. The Task Force concluded that determining whether the cash receipts from the sale of such donated financial assets are classified as an operating activity or instead are classified as a financing activity should be consistent with classifying receipts of cash donations.

BC7. The Task Force decided that the scope of this Update should be limited to the statement of cash flows classification of cash receipts resulting from the sale of donated financial assets that upon receipt were directed without any NFP-imposed limitation for sale and were converted nearly immediately into cash. The Task Force concluded that the existence of an NFP-imposed limitation on the sale of donated financial assets (for example, a limit order) would be indicative of an investing decision and, therefore, such a limitation should result in an investing cash flows classification for the related proceeds. Task Force members discussed broadening the scope of this Update to include cash flows resulting from the near immediate sale of other donated assets, such as cars and works of art, but concluded that since they are not aware of diversity in practice related to classification of cash flows from sale of other assets and that the additional time required to deliberate such a scope expansion might delay addressing known diversity, the scope of this Update should be limited to cash flows from donated financial assets. In making that decision, the Task Force encouraged the Board to consider the classification of cash receipts from the sale of donated assets other than financial assets as part of its project, Not-for-Profit Financial Reporting: Financial Statements.

BC8. The Task Force discussed whether the ability to avoid significant investment risks and rewards through near immediate conversion into cash should be one of the criteria for applying the guidance or whether the intent to avoid the investment risks and rewards, as evidenced by an unrestricted direction upon receipt of the financial asset for near immediate sale, should be the only basis for classifying the cash receipt as an operating or financing activity. The Task Force concluded that because the volatility in the fair value is a common characteristic of investing activities, an entity's ability to avoid significant investment risks and rewards of a donated financial asset through their near immediate conversion into cash (combined with its intent to do so at the time of receipt) would be a relevant criterion for determining whether the cash flows are reflective of investing activities of the NFP. Furthermore, the Task Force concluded that classifying cash receipts for which an NFP is subject to a significant amount of investment risks and rewards as anything other than investing activities might impair a user's ability to assess the uncertainty in prospective cash receipts associated with future sales of donated financial assets. However, the Task Force concluded that use of a criterion that requires that a donated financial asset be converted nearly immediately into cash should largely achieve the same result as use of a criterion explicitly focused on the ability of an NFP to avoid significant investment risks and rewards, and it achieves a better balance between the benefits and costs to implement the guidance. The Task Force chose not to define nearly immediately but concluded that, in arriving at its consensus, nearly immediately is synonymous with promptly and should generally be considered to be within days rather than months, and should be interpreted to be the same regardless of the type of financial asset being sold.

BC9. The Task Force reached a consensus that entities should apply the amendments in this Update prospectively to cash receipts on or after the date of adoption from the sale of donated financial assets. Retrospective application to all prior periods presented upon the date of adoption is also permitted but not required. The Task Force concluded that the costs of retrospectively applying the guidance may exceed the benefits of having comparable financial information. However, because comparability of financial information of an entity across periods is useful and the information required for retrospective application may be available to some NFPs, the Task Force decided to permit retrospective application of the amendments. The transition guidance is based on the cash receipts from the sale of donated financial assets to ensure consistent treatment of cash receipts from those sales in the period of adoption.

BC10. The Task Force decided to permit early adoption of the amendments from the beginning of the fiscal year of adoption so as to eliminate existing diversity as soon as is practicable. The Task Force concluded that entities that have not issued their financial statements for periods ending before the issuance of this Update should be able to adopt the amendments in this Update for those periods and therefore decided to permit an NFP to early adopt the amendments in this Update for fiscal years beginning before October 22, 2012 (the issuance date of this Update). However, such early adoption is permitted only if the NFP's financial statements for those fiscal years and interim periods within those years have not yet been made available for issuance.

BC11. The objective of financial reporting is to provide information that is useful to present and potential donors, creditors, investors, and other capital market participants in making rational investment, credit, and similar resource allocation decisions. However, the benefits of providing information for that purpose should justify the related costs. Present and potential donors, creditors, investors, and other users of financial information benefit from improvements in financial reporting, while the costs to implement new guidance are borne primarily by those that presently provide resources to the reporting NFP. The Board's assessment of the costs and benefits of issuing new guidance is unavoidably more qualitative than quantitative because there is no method to objectively measure the costs to implement new guidance or to quantify the value of improved information in financial statements.

BC12. The amendments in this Update should be applied prospectively, and no additional recurring disclosures are required. As such, the Task Force does not anticipate that NFPs will incur significant costs as a result of the amendments. The amendments provide the benefit of eliminating diversity in practice and increasing the consistency of the classification of the cash receipts from the sale of qualifying financial assets and cash donations received in the statement of cash flows.