FASB Issues New Guidance on Nonprofit Financial Statements
Last month, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) which changes how a not-for-profit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows.
A few of the changes are presented below:
Net Asset Classification
The existing three classes of net assets (unrestricted, temporarily restricted, and permanently restricted) are replaced with two new classes of net assets—net assets with donor restrictions and net assets without donor restrictions.
However, current requirements to provide information about the nature and amounts of different types of donor-imposed restrictions, highlighting how those restrictions affect the use of resources, including their liquidity, have been retained.
Information about Liquidity and Availability of Resources
Qualitative information that communicates how a not-for-profit manages its liquid available resources to meet cash needs for general expenditures within one year of the balance sheet date.
Quantitative information that communicates the availability of a not-for-profit’s financial assets at the balance sheet date to meet cash needs for general expenditures within one year of the balance sheet date.
Information about Expenses and Investment Return
All not-for-profits are to provide expenses by nature and function, as well as an analysis of expenses by both nature and function. This analysis can be presented on the face of the statement of activities, as a separate statement, or in the notes to the financial statements. There will be enhanced disclosures about the methods used to allocate costs among functions.
Investment return is to be presented net of all related external and direct internal expenses and eliminates the currently required disclosure of those netted expenses.
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for the complete FASB bulletin.