New FASB Accounting Standards for Nonprofit Organizations Financial Statements

The Standard is Effective for Fiscal Years Beginning After December 15, 2017

The new FASB standards is for Update 2016-14 Not-For-Profit Entities (Topic 958): Presentation of Financial Statements of Nonprofit Organizations.  The new guidance FASB guidance for calendar year organizations is 2018. Early adoption is allowed,  so if an organization wants to implement the new standards for calendar year 2017, they are allowed to do so.

What are the Changes to the Financial Statements for the New Standard?

  • Classification of Net Assets –  In the past, the financial statements had three different classifications for net assets, Unrestricted, Temporarily restricted, and Permanently restricted.  The new classifications are now just two classifications, “With Donor Restrictions” and “Without Donor Restrictions”.  However, for management purposes, the nonprofit may need to still track the net assets internal in three categories to account for those net assets that are held  in perpetuity.
  • Board Restrictions –  The new requirement stipulates that all board-designated restrictions be disclosed in the financial statement in their amounts and the purpose of the designation.
  • Expense Presentations –  In the new rules, the nonprofit will have to show in the financial statements expenses by function and classification.  This was already being disclosed by most nonprofits in the past that were required to have an audit.
  • Disclosure of Liquidity –  The new pronouncement requires the nonprofit to disclose the liquidity of the balance sheet accounts that are available to meet the cash needs of the Organization within the upcoming year. The standards requires the disclosure both quantitatively and qualitatively.

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Diana McCalpin is an accountant who manages a Certified Public Accounting Practice in Laurel, Maryland which performs audit, accounting and tax services to customers. She loves to share information with clients to help them grow their businesses and be profitable.

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