NONPROFIT NEWSLETTER November 2013 NONPROFIT HOT TOPICS ____________________________________________________________ New Proposed Standard on Going Concern Uncertainties
From Our Partners
THE RULES OF VENTING
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FROM THE NONPROFIT PARTNERS 2 T HE RUL E S OF V E N T I NG Sally works at CHI, a nice nonprofit in the mid-Wilshire area. She works in the finance department and has been at CHI five years. Just before lunch the executive director, Jerry, gave Sally a hard time over something and Sally was upset. Sally felt Jerry was being unfair and, honestly, a little rude. Jerry is still new. He has only been at CHI for six months, and although he knows a lot already, he is still learning the CHI way of doing things.
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WHAT MATTERS TO YOUR ORGANIZATION 5 N E W P ROP O SE D S TA N DA R D O N G OI NG C O N C E R N U N C E R TA I N T IE S In June 2013, the FASB issued its proposed standard under Topic 205 entitled “Disclosure of Uncertainties about an Entity’s Going Concern Presumption.” Under GAAP, financial statements are prepared under the presumption that the entity will be able to continue as a going concern; that is, the entity will be able to realize its assets and meet its obligations in the ordinary course of business.
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F R O M O U R PA R T N E R S
THE RULES OF VENTING BY LEWIS SHARPSTONE | PARTNER LSharpstone@SingerLewak.com
This is the second in the series of articles on management topics on which little is ever written.
advice as to how to deal with Jerry. When Kathy gets back to the office she goes to see Tony and starts the conversation with “you need to hear what I just heard about Jerry.”
T HE C A SE S T U DY: Sally works at CHI, a nice nonprofit in the mid-Wilshire area. She works in the finance department and has been at CHI five years. Just before lunch the executive director, Jerry, gave Sally a hard time over something and Sally was upset. Sally felt Jerry was being unfair and, honestly, a little rude. Jerry is still new. He has only been at CHI for six months, and although he knows a lot already, he is still learning the CHI way of doing things. Sally has gone to lunch with Meg once a month for the last five years. Meg also works at CHI. Meg and Sally actually started on the same day which is why they are work friends even though they work in different departments and don’t interact with each other on a day to day basis. Today is Sally and Meg’s lunch day so, as usual, Sally goes to the lobby to meet Meg at noon. Meg is already waiting. But she has another person with her:
QU E S T IO NS: Kathy. Kathy is pretty new at CHI, 3 months. Meg asks Sally if Kathy can come along to lunch. “Of course” says Sally. What can she say, right? Walking to lunch, Meg can’t help but notice Sally is upset about something. “Is everything OK? asks Meg. The floodgates open as Sally tells Meg about the latest episode with Jerry. Meg responds with, “So you think that’s bad? Listen to how Jerry spoke to me last week.” Meg tells Sally about that episode. Kathy doesn’t even know Jerry and doesn’t work directly with Jerry at all. But her colleague Tony, who started on the same day as Kathy, is going to start working on his first project directly for Jerry tomorrow. Now she is scared for Tony and feels she needs to give him some
What just happened here? Is this a realistic example of the kind of thing that happens in reality? Who is acting properly? Who isn’t? Why? What is the difference between gossiping and venting? A N A LY SIS: Let’s start with Sally, and the last question above. Was she wrong in telling Meg why she was upset? After all, she was only responding honestly to her friend’s concerned enquiry as to what was bothering her. The answer here is “yes and no”! What Sally was doing was venting, or at least trying to vent. So, is it good to vent? The answer is yes! We all vent and it’s healthy to vent. But there are
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rules of venting. These rules are vitally important. So long as the “ventor” and the “ventee” obey the rules, the vent remains a vent and that’s OK. But if the rules are broken by either the ventor or the ventee, then the vent becomes gossiping and that is not OK. Here are the rules of venting: 1. Venting happens one on one. By definition, there is never a need to “vent” to more than one person. By the way, you don’t even need one person to vent to. Almost as effective is to vent to yourself – write down the vent. Just be sure to rip up the paper when you’re done! In our case study, Sally was venting, but to more than one person. So in this situation it was wrong of Sally to vent to Meg
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By definition, there is never a need to “vent” to more than one person. By the way, you don’t even need one person to vent to. Almost as effective is to vent to yourself – write down the vent. Just be sure to rip up the paper when you’re done! with Kathy also listening. So Sally was actually gossiping. 2. To role of the ventee is to listen. However tempting it is for the ventee to chime in with a related story or two, the ventee must absolutely refrain from doing so.
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Why is it often so hard for ventees to obey this rule? Two reasons. The first is that the ventee wants to help make the ventor feel better and mistakenly believes that sharing a related story will help comfort the ventee in some way. The second is that the ventee actually needs to vent about either the same person or a similar issue and seizes the opportunity to do so. Once the ventee chimes in with a related story, the vent automatically becomes gossiping. Meg, in our case study, violated this rule. After the ventee is finished venting, the ventee should try to change the topic of conversation for a minute or two, then conclude the conversation with something like “so, do you feel
a bit better about the situation?” Hopefully the response will be something like “yes, I’m done with this. Back to the grindstone!” Vent successful. In the situation where the response is, “Actually, it’s still really bothering me,” the ventee should respond with something like, using the case study above, “Well you probably ought to speak to Jerry directly about how you feel.” In this situation, if appropriate, the ventee may offer some advice or coaching as to the best way for the ventee to approach the person who upset them. 3. All vents are confidential. If you are ever ventee, you are forbidden from repeating the vent to anyone. If you repeat a
vent, you are no longer a ventee, you are a gossiper. Or potentially worse, a slanderer. In addition, by repeating a vent you received, you may not just be hurting the reputation of the subject of the vent, you may also be hurting the reputation of the ventor. Vent confidentiality is usually implied. People usually only vent to people they already know and trust. It’s still a fairly good idea for the ventor to start a vent with something like “would you mind if I talk to you about something but I would like to ask that this stay between us.”
Following these three common sense rules will hopefully guide you clear of the gossip zone. Happy venting!
LEWIS SHARPSTONE CAN BE REACHED AT LSHARPSTONE@SINGERLEWAK.COM OR 310.477.3924
In our case study it was Kathy, however well intentioned, that broke this rule.
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W H AT MAT T E R S TO YO U R O R G A N I Z ATI O N
NEW PROPOSED STANDARD ON GOING CONCERN UNCERTAINTIES BY JEFF HOLT | PARTNER
JHolt@SingerLewak.com | 310.477.3924
In June 2013, the FASB issued its proposed standard under Topic 205 entitled “Disclosure of Uncertainties about an Entity’s Going Concern Presumption.” Under GAAP, financial statements are prepared under the presumption that the entity will be able to continue as a going concern; that is, the entity will be able to realize its assets and meet its obligations in the ordinary course of business.
Up until now, the only guidance available was in the auditing standards, and this proposed guidance clarifies and codifies within GAAP the evaluation and going concern disclosure requirements Currently, however, there is neither guidance in US GAAP about management’s responsibilities in evaluating going concern uncertainties, nor is there guidance on how such uncertainties 5 | SingerLewak
• An entity would evaluate going concern at each annual and interim reporting period and provide footnote disclosures when it is:
should be disclosed in an entity’s financial statements. Up until now, the only guidance available was in the auditing standards, and this proposed guidance clarifies and codifies within GAAP the evaluation and going concern disclosure requirements. The main provisions are as follows: • The proposed guidance on whether the footnote disclosures on going concern would be needed applies to all entities, public, private and nonprofit. An SEC entity would further need to evaluate and determine whether there is a substantial doubt about its ability to continue as a going concern
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»» More likely than not that the entity will be unable to meet its obligations within 12 months after the financial statement date without taking actions outside the ordinary course of business, or »» Known or probable that the entity will be unable to meet its obligations within 24 months after the financial statement date without taking actions outside the ordinary course of business
An SEC entity would further need to evaluate and determine whether there is a substantial doubt about its ability to continue as a going concern
• If either A or B above is met, then the entity would have to disclose, in its footnotes, the following information: • The principal conditions and events that give rise to the entity’s potential inability to meet its obligations • The possible effects those conditions and events could have on the entity • Management’s evaluation of the significance of those conditions and events • Mitigating conditions and events, and
• Management’s plans that are intended to address the entity’s potential inability to meet its obligations
If the entity is an SEC filer, it must evaluate whether there is substantial doubt about its going concern presumption. If there is, it would have to disclose this in the footnotes.
• If the entity is an SEC filer, it must evaluate whether there is substantial doubt about its going concern presumption. If there is, it would have to disclose this in the footnotes. If an entity is not an SEC filer, it would not be required to evaluate or disclose whether there is substantial doubt about its going concern presumption but would be required to apply all the other disclosure requirements above. JEFF HOLT CAN BE REACHED AT JHOLT@SINGERLEWAK.COM OR 310.477.3924
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