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:
- Presentation on the face of the Statement of Financial Position as “Net Assets with Donor Restrictions” and “Net Assets without Donor Restrictions.”
- The pronouncement also requires the change in each of the two classes of net assets on the face of the Statement of Activities.
- Elimination of the indirect reconciliation of cash flows when the direct method of presenting cash flows is elected.
- Enhanced disclosures of governing board designations, appropriations and similar self-imposed limits in use of resources without donor restrictions.
- Composition of net assets with donor restrictions together with an explanation of how the restrictions affect the use of assets or resources.
- 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.
- 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.
- Underwater endowment funds.
Contact us to find out how this will impact you.