In August 2016 the FASB issued a new Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities which contains changes in reporting requirements that will significantly affect how Non-Profits report and communicate to the public. The stated purpose is improving overall financial reporting by Non-Profits.
Some of the New Provisions:
Net asset classification will change from 3 classes to 2 classes.
▪ Unrestricted Net Assets will be Net Assets without Donor Restrictions.
▪ Temporarily & Permanently Restricted Net Assets will be Net Assets with Donor Restrictions
Cash Flows will continue to present the net amount of operating cash flows using the direct or
indirect method but will no longer require a reconciliation between the methods if using the
▪ Amounts and purpose of board designated appropriations.
▪ Composition of net assets with donor restrictions.
▪ Qualitative information that communicates how a Non-Profit manages its liquid resources.
▪ Quantitative information that communicates the availability of assets to meet cash needs for
general expenditures, either on the Balance Sheet or in the Notes.
▪ Amounts of expenses by natural and functional classification need to be presented one of 3
ways. As a table in the Notes, on the Statement of Functional Expenses or Statement of
▪ Disclosure of underwater funds which are included with net assets with donor restrictions.
As you might guess each of these changes may require significant analysis. This ASU is effective for annual financial statements issued for fiscal years beginning after December 15, 2017. The standard will be here soon and now is the time to begin to educate your business office, board members and management on these changes and the impact they will have on your own financial statements next year. Staying ahead of these changes will help ensure you don’t experience delays in financial statement reporting.
Contact GKG to learn more about how we can advise and assist with your implementation concerns and challenges.
Paul P. Conniff, CPA, CGMA