NEWS

FASB is implementing new financial reporting standards for nonprofits

September 29, 2016

This update is focused on improving financial reporting requirements for nonprofits including the current net asset classifications and information provided in the financial statements and notes about liquidity, financial performance and cash flows.

Accounting Standards Update No. 2016-14 was issued in August of 2016 and will be effective for nonprofits with fiscal years beginning after December 15, 2017 and interim periods within fiscal years beginning after December 15, 2018.

See below for a summary of the changes:

  • Reduces net asset classifications from three to two (net assets with donor restrictions and net assets without donor restrictions)
  • Eliminates the indirect method reconciliation on the statement of cash flows for organizations presenting the direct method of cash flows.
  • Provides enhanced disclosures about
    • Governing board designations of net assets or other resources
    • Composition of net assets with donor restrictions
    • Qualitative information about how a NFP manages its liquid resources
    • Quantitative information about the use assets in order to meet cash needs
    • Functional expenses
    • Cost allocation methodologies
    • Underwater endowment funds
  • Reports investment returns net of external and direct internal investment expenses
  • Uses, in the absence of donor stipulations, the placed-in-service approach for reporting expirations of gifts of cash and other assets for acquisition or construction of long-lived assets

For more information please contact one of our professionals.