Thursday, July 19, 2018

Changes in Not-for-Profit Organization Financial Statement Presentation

In August of 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-14.  This ASU changes the financial statement presentation for not-for-profit organizations effective for fiscal years beginning after December 15, 2017.  The main areas of changes are outlined below.

Net Assets – These are to be reflected as either with donor restrictions or without donor restrictions, rather than the former presentation of unrestricted, temporarily restricted or permanently restricted.  Information pertaining to board designated net assets is now mandatory rather than optional.

Endowments – The presentation of underwater endowments is reflected in net assets with donor restrictions and bear additional disclosure requirements.

Investments – Investment income is no longer required to be broken down by components, and expenses are no longer required to be disclosed.  Investment return shall now be reported net of external and direct internal investment expense.

Asset Liquidity – Not-for-Profit organizations are now required to disclose qualitative information on how the entity manages its available liquid resources and the related liquidity risk.  Organizations must also disclose quantitative information that communicates the availability of current financial assets on the date of the statement of financial position.

Expenses – All not-for-profit organizations must now report expenses by function and natural classification and disclose the methods used to allocate costs among programs and supporting services.

There are also additional requirements pertaining to the presentation of special events and capital campaigns.

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