In August 2016, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2016-14, “Presentation of Financial Statements of Not-for-Profit Entities.” This new ASU is effective for annual financial statements for fiscal years. beginning after December 15, 2017. The amendments in the update should generally be applied on a retrospective basis in the year that the update is first applied.

The new ASU addresses the following issues:

1. Presentation on the face of the Statement of Financial Position as “Net Assets with Donor Restrictions” and “Net Assets without Donor Restrictions.”
2. The pronouncement also requires the change in each of the two classes of net assets on the face of the Statement of Activities.
3. Elimination of the indirect reconciliation of cash flows when the direct method of presenting cash flows is elected.
4. Enhanced disclosures of governing board designations, appropriations and similar self-imposed limits in use of resources without donor restrictions.
5. Composition of net assets with donor restrictions together with an explanation of how the restrictions affect the use of assets or resources.
6. Enhanced disclosures regarding qualitative information that communicates how the NFP manages its liquid resources available to meet cash needs for general expenditures within on year of year-end. Such availability may be affected by a financial asset’s nature, external limits imposed or internal limits.
7. Amounts of expenses by both their natural classifications and their functional classifications, together with a description of the methods used to allocate costs among programs and support functions.
8. Underwater endowment funds.

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