FASB ISSUES ACCOUNTING STANDARDS UPDATE

On August 18, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-14 – Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. The new guidance is intended to provide transparency, reduce complexity, and “improve the usefulness of information provided to donors, grantors, creditors, and other users of an NFP’s financial statements.” The most significant changes focus on net asset classifications. The three previous net asset categories consisting of unrestricted, temporarily restricted, and permanently restricted have been reduced to two: unrestricted and donor restricted. Enhanced disclosures on the composition of net assets with donor restrictions and how the restrictions affect the use of resources will also be required. Underwater donor-restricted endowments will be included in donor restricted net assets rather than unrestricted. Other new requirements include providing qualitative and quantitative information related to the organization’s management of resources and liquidity; presentation of expenses both by nature and function, along with an analysis of the expenses and disclosure of the methods used to allocate the functional costs among program and support functions; and reporting investment return net of external and direct internal investment expenses. While retaining the option to present cash flows using either the direct or indirect method, the requirement to provide a reconciliation when using the direct method has been eliminated. The new standards 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. Early adoption is permitted. FASB continues to evaluate the financial reporting model for not-for-profit organizations, and more significant changes are expected in Phase 2 of this project.

Read the full press release at www.FASB.org.

Donna Gonser, CPA dgonser@LumsdenCPA.com As director of our auditing and accounting department, Donna possesses a wealth of knowledge in auditing, taxation and other financial areas to assist clients achieve their short and long-term goals. She enjoys working closely with organizations to evaluate their capacity, performance and other key measures – then helping them use this information to run their organizations more effectively. Her primary client responsibility is management and oversight of services provided to exempt organizations and professional service corporations. She has specific expertise with charitable organizations, foundations, governmental agencies, public authorities and educational institutions, including colleges and universities and private and charter schools. Donna also oversees Firm services provided to law firms, other professional service organizations and works closely with various commercial businesses.

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