FASB MODIFIES NOT-FOR-PROFIT ACCOUNTING RULES

Dealing With DementiaThe Financial Accounting Standards Board (FASB) recently issued ASU 2016-14 to improve the presentation of financial statements of not-for-profit entities such as charities, foundations, universities, and nonprofit health care providers, etc.  This is the first major change to the nonprofit financial statement model in over 20 years, which is intended to provide more useful information to donors, grantors and other users. The ASU becomes effective for fiscal years beginning after December 15, 2017.

Summary of Major Changes
The new standard:

  • Enhances disclosures of key elements of net assets by eliminating the previous three net asset categories (unrestricted, temporarily restricted, and permanently restricted) in favor of two categories which will simplify information for financial statement users.
  • Changes the method by which operating cash flows are reported on the statement of cash flows by allowing the accounting industry to choose between the direct method and indirect method
  • Requires a not-for-profit to provide in the disclosures qualitative information on how it manages its liquid available resources for the year ahead.
  • Requires reporting of expenses by function and nature, as well as an analysis of expenses by both function and nature.

The crux of the changes are to make the financial statements more informative and transparent for the Organization.  Please see this link and contact us for more information on how these changes affect your organization.

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