More background on revision to nonprofit reporting
The new rules revising not-for-profit financial reporting are a significant change although they are not as dramatic as what we saw a long time ago with SFAS #116 and #117.
ASU 2016-14, Presentation of Financial Statements of Not-four-Profit Entities, was issued August 18, 2016. You can find the document here.
I will write a series of articles going into detail on the new rules. In the meantime, here are a few more articles providing background.
(This article is cross-posted from my other blog, Nonprofit Update.)
8/18 – AICPA – FASB’s standard Aims to Improve Not-for-Profit Financial Reporting – good overview of most changes
8/18 – Journal of Accountancy – FASB modifies not-for-profit accounting rules – High level overview. Article also provides some background on the process. Revision of GAAP to require operating measures is still under consideration but will be part of the next phase.
9/13 – Nonprofit Quarterly – What the New FASB Accounting Standards Will Mean for Your Nonprofit – good survey of the changes.
Main focus for this article:
- Classification of net assets – two classes instead of three
- Liquidity disclosures – more disclosures
- Presentation of expenses – all NFP will present expenses on a natural and functional basis, as a separate basic financial statement, inside the statement of activity, or in the notes.
9/21 – AICPA – 4 Key Facts about the New FASB Not-four-Profit Standard – Guest post calls attention to four key ideas
- This is not an overhaul but instead is an update
- Increased disclosures from presenting expenses on both functional and natural classification
- Dropping from 3 to 2 classes of net assets will increase emphasis on disclosures
- New liquidity disclosures
11/9 – AICPA – Top 3 Takeaways on FASB’s New Not-for-Profit Standard – The same author describes three implementation issues charities will face:
- Liquidity disclosures will require information that most not-for-profits don’t track currently
- Charities will need to review their procedures for board designation of net assets, making sure that they are tracked and monitored as intended
- Netting investment expenses against investment revenue will require tracking costs more closely; many charities may need to do some time tracking for staff who manage investments