Nonprofit Accounting Standards.

Abstract This article presents the response of Robert N. Anthony to U.S. Financial Accounting Standards Board (FASB) member Robert H. Northcutt concerning issues on the accounting of income. First, Mr. Northcutt states that the FASB and I have fundamentally different views about the definitions of income and capital. He states that a gift, is a gift, is a gift. I maintain that there is a fundamental difference between a gift for operating purposes and a gift for capital. We also have different views about the classification of a contribution that is an advance payment for work to be done in a future period. He maintains that such a payment is not a liability because the organization has no legal obligation to provide service. I believe that it is a liability because as a practical matter the organization is obligated to provide, and will provide, the future service. Mr. Northcutt states that my income capital distinction can be presented within the financial reporting structure of FASB. I agree. A report of operating performance is the most important financial statement in both business enterprises and nonprofit organizations. Mr. Northcutt writes that my continuing defense of the status quo has been thoroughly considered by the FASB and that it is a minority view. I disagree. The FASB has indeed heard and rejected my views, but it never has explained why its framework provides more useful information than mine. As for being thoroughly considered, my formal request for reconsideration of the standards was rejected after a discussion that lasted 8 minutes, I was not permitted to speak.