EITF (Emerging Issues Task Force) 12-A tackles the question on everyone’s lips: where do you put the sale of donated stock on the cash flow statement? Is it an operating expense or an investing expense?
This is why it might be keeping some of you awake at night: the cash provided (used) by operating indicate how well an organization’s activities support itself (or doesn’t). The cash provided (used) by investing activities indicates how much is going towards capital expenses but can also show if an organization is having to sell investments to pay bills.
The Task Force concluded that a nonprofit’s sale of donated securities that are unrestricted should be classified as an operating activity if it is converted to cash shortly after receipt (general practice). If the donation was restricted, then it should be included with financing cash flows.
The impact: if it’s unrestricted – it’s your operations working that brought in the donation and it should count towards the efforts of operation; if it’s restricted, it still isn’t an investment cash flow and receives treatment similar to endowment activities.
The issue is open for comments for 90 days. No effective date at this time. Read more about it here.