FASB ISSUES NEW GUIDANCE
ON NOT-FOR-PROFIT FINANCIAL REPORTING
FASB In Focus
Understanding Costs & Benefits
Video: Why a New Not-for-Profit
Financial Reporting Standard?
“While the current not-for-profit financial reporting model held up well for more than 20 years, stakeholders expressed concerns about the complexity, insufficient transparency, and limited usefulness of certain aspects of the model,” said FASB Chair Russell G. Golden.
“The new guidance simplifies and improves the face of the financial statements and enhances the disclosures in the notes—which will enable not-for-profits to better communicate their financial performance and condition to their stakeholders while also reducing certain costs and complexities in preparing their financial statements,” Mr. Golden added.
The ASU requires improved presentation and disclosures to help not-for-profits provide more relevant information about their resources (and the changes in those resources) to donors, grantors, creditors, and other users.
These include qualitative and quantitative requirements in the following areas:
- Net Asset Classes
- Investment Return
- Liquidity and Availability of Resources
- Presentation of Operating Cash Flows.
Outreach included three roundtables with more than 35 representatives including users, preparers, and auditors; 10 workshops and fieldwork meetings with preparers of various types and sizes; 12 meetings with the FASB’s Not-For-Profit Advisory Committee; 10 meetings with the FASB’s Not-For-Profit Project Resource Group comprising more than 20 users, preparers, auditors, and academics; 25 meetings with not-for-profit industry representative groups; and other meetings with more than 60 stakeholders.
Not-for-profit organizations that will be affected include charities, foundations, colleges and universities, health care providers, religious organizations, trade associations, and cultural institutions, among others.
The amendments in the standard are effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. Application to interim financial statements is permitted but not required in the initial year of application. Early application of the amendments in this Update is permitted.
On September 13, 2016, the FASB will host IN FOCUS: FASB Accounting Standards Update on Not-for-Profit Financial Statements, a live webcast taking place from 1:00 to 2:15 p.m. EDT. The webcast will feature FASB Member Larry Smith discussing the ASU with FASB staff and answering questions submitted by viewers. Live broadcast viewers will be eligible for up to 1.5 hours of CPE credit. For more information or to register for the event, click here.
Further information about the ASU—including a FASB in Focus overview, a FASB: Understanding Costs and Benefits document, and a video entitled Why a New Not-for-Profit Financial Reporting Standard? is available at www.fasb.org.
About the Financial Accounting Standards Board
Established in 1973, the FASB is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB. For more information, visit www.fasb.org.