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Permanently Restricted Assets Should Be Classified as Permanently Restricted Under UPMIFA

Permanently Restricted Assets Should Be Classified as Permanently Restricted Under UPMIFA

Permanently Restricted Assets Should Be Classified as Permanently Restricted Under UPMIFA

FASB recommendation to distinguish between permanently and temporarily restricted has no basis in law

Charities and their accountants are struggling to understand how to account for donor-restricted endowments held by charities under the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”) which has now been adopted in about 43 states. 

The Financial Accounting Standards Board has given considerable discretion to the boards of directors of the charities to determine how much should be treated as permanently restricted, and how much should be classified as temporarily restricted.  In our opinion, that bifurcation does not reflect the board’s power under the law and will lead to huge variation in financial statements across the country.  In our...

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