FASB Proposes Improvements to Not-For-Profit Financial Statements

Posted by Jonathan D. Moll, CPA

FASB Nonprofit Standards - Delaware Single AuditToday (04/22/15) FASB issued a proposed Accounting Standards Update intended to improve existing standards for financial statement presentation for Nonprofit Organizations. A summary of the changes is provided, as well as, the full proposed ASU at fasb.org. The new standards will significantly change financial statement presentation for most nonprofit organizations.

The more significant changes include the following:

  • Net Asset Classification will include 2 classes, with donor restrictions and without donor restriction.  This replaces the current 3 class presentation.
  • Requires disclosure of both quantitative and qualitative information about liquidity
  • Reporting in the statement of activities on an intermediary measure of operations that is mission based
  • Requires the direct method for preparation of the statement of cash flows, with additional presentation of the indirect method for operating activities permitted but no longer required
  • Present information for all nonprofit organizations about expenses by function, nature, or both with enhanced disclosure requirements in notes if both are not on the face of the statement.

Additional information such as effective date will be determined by the Board after considering stakeholder’s feedback during this comment period on the proposed update.  Stay tuned.

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