ASC 958-325, Not-for-profit entities—Investments—other, provides incremental industry-specific guidance for NFPs (other than NFP HCOs) on accounting for certain investments entered into for purposes of generating investment return. This includes investments in equity instruments that do not have readily determinable fair values and are not consolidated or accounted for using the equity method, mortgage notes that are not debt securities, interests in venture capital funds, partnership interests, oil and gas interests, and real estate.

This specialized guidance is incremental to the guidance in ASC 325, Investments—other, which all NFPs apply when accounting for “cost method” investments made in carrying out the NFP’s mission-based activities, such as investments in operating joint ventures.

The specialized guidance in ASC 958-325 facilitates the reporting and administration of investment portfolios for which a total-return investing strategy is used, such as endowment portfolios. It requires NFPs to make an accounting policy choice between accounting for “alternative investments” based on either their fair values or their carrying values. The method selected must be consistently applied to all alternative investments within a portfolio. The requirement to value all alternative investments using the same measurement basis effectively establishes a portfolio-wide fair value option for NFPs other than HCOs (discussed further at NP 9.3), which is widely applied.

The measurement guidance differs slightly among subsets of NFPs. ASC 958-325 carries forward legacy AICPA accounting guidance for various subsets of NFPs for alternative investments, amended as necessary by subsequent FASB standards.

Figure NP 9-1A summarizes the accounting models for the various NFP subsets.

Figure NP 9-1A
ASC 958-325-35 subsequent measurement guidance

ASC 954-325, Health care entities—other, requires NFP HCOs to report investments in assets that are not financial instruments using amortized cost.