Department of Labor’s New Overtime Rule is Delayed
On Nov. 22, a federal district court judge issued a nationwide preliminary injunction against the implementation of the U.S. Department of Labor’s (DOL) Overtime Rule. The new overtime rule was slated to go into effect on December 1, 2016. This new overtime rule extends the eligibility to earn overtime to workers who were not previously subject to overtime rules because of their compensation levels.
The injunction is likely to remain in effect until the case is decided which may take months. The injunction preserves the status quo until the court can determine whether the DOL has the authority to establish the overtime rule as well as determine the overtime rule’s validity.
This court decision is only temporary so stayed tuned for updates on this issue.
FASB Proposes a Clarification to Nonprofit ASU
On October 27, the Financial Accounting Standards Board (FASB) issued a proposed technical correction to ASU No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements for Not-for-Profit Entities. The proposed correction aims to clarify the minimum requirements for the reconciliation that a not-for-profit entity (NFP) is required to disclose if it has endowment funds. The current wording in the ASU includes the wording “that contain no purpose restrictions” when the disclosure requirements are being discussed. This technical correction would maintain the legacy disclosure requirement and clarify that all funds appropriated for expenditures from an endowment fund should continue to be disclosed in the footnotes when showing the changes in the endowment net assets during the financial period being reported. Thus, the removal of the words “that contain no purpose restrictions” in the ASU should be removed to support the intent of the required minimum disclosure of the endowment activity.
The proposed amendment would not require transition guidance and would be incorporated in the final Accounting Standards Update. Additional details are available via the FASB website here.
Rejections of Uniform Guidance Audit Reports
Certain federal agency field offices located throughout the country have erroneously been rejecting auditor reports that refer to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards at 2 CFR 200 (Uniform Guidance) as the source of governmental audit requirements. The rejections are a result of the federal agency field offices being unaware that the auditor’s report has changed because of the implementation of the Uniform Guidance. The field offices have been rejecting the reports because the reports failed to reference Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, as required in the past.
If your organization’s Uniform Guidance reports are rejected, you and your auditor should contact the federal agency single audit coordinator identified in Appendix III, “Federal Agency Single Audit, Key Management Liaison and Program Contacts” of the 2016 OMB Compliance Supplement. It would not be appropriate to reissue the reports and refer to OMB Circular A-133 as field offices have been requesting.
FASB Clarifies Restricted Cash Presentation
In November the FASB issued ASU 2016‑18, Statement of Cash Flows (Topic 230): Restricted Cash to clarify the presentation of restricted cash in the statement of cash flows. This ASU was issued to address diversity in practice due to a lack of guidance on how to classify and present changes in restricted cash or restricted cash equivalents in the statement of cash flows. The ASU does not define restricted cash and there is no intent to change practice for what an entity reports as restricted cash.
The amendments require that a statement of cash flows explain the change during the period in restricted cash or restricted cash equivalents, in addition to changes in cash and cash equivalents. That is, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Consequently, transfers between cash and restricted cash will not be presented as a separate line item in the operating, investing or financing sections of the cash flow statement. The ASU includes examples of the revised presentation guidance.
The amendments require an entity to disclose information about the nature of the restrictions and amounts described as restricted cash and restricted cash equivalents. Further, when cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, an entity must reconcile these amounts to the total shown on the statement of cash flows, either in narrative or tabular format. This information should be provided on the face of the cash flow statement or in the notes to the financial statements.
The ASU is effective for nonprofit organizations for fiscal years beginning after December 15, 2019. The provisions of the ASU should be applied retrospectively to each period presented in the financial statements. Early adoption is permitted.
For more information, please contact your Marvin and Company, P.C. representative.