What’s a nonprofit to do when so many financial reporting changes are scheduled to ensue?
The Financial Accounting Standard Board (FASB) issued the most sweeping changes to its nonprofit financial reporting standards in the last 20 years. The new rules are designed to help financial statement users better understand a nonprofit’s financial story (instead of feeling like they’re reading it with their eyes shut!). Specifically, the rules will affect how not-for-profit organizations present a variety of financial information – including net assets, expenses, available resources, and operating cash flows.
Let CRI help you prepare for the new nonprofit financial reporting standard. Today is the day to get your implementation procedures underway!
3 Minutes on the 3 Main Changes of the New Nonprofit Reporting Standard
One Goal, Two Goals, Three Goals, Four Goals of the New Standard
We profess what the new rules are designed to address.
Refresh the current financial reporting model.
Improve the net asset classification scheme.
Clarify key information in the financial statements and notes.
Enable nonprofits to more clearly tell their financial stories.
Oh, The Three Key Changes You’ll Need to Know!
Below is a summary of important updates to commit to memory.
1. New net asset classifications.
The standard replaces the existing three net asset classes (unrestricted, temporarily restricted, and permanently restricted) with two new categories:
Net assets with donor restrictions. Includes what is currently reported as temporarily restricted and permanently restricted (with differences in the nature of the restrictions disclosed in the notes).
Net assets without donor restrictions. Consists of what is currently reported as unrestricted assets.
2. Expense reporting by function and nature.
Entities can present this categorization in one of the following ways:
on a separate statement,
in the footnotes, or
on the statement of activities.
3. Requirements for reporting liquidity and available resources.
Organizations must provide the following:
Qualitative information. Indicates how they manage liquid available resources to meet cash needs for general expenses within one year of the balance sheet date.
Quantitative information. Shows the availability of their financial assets at the balance sheet date to meet cash needs for general expenses within one year.
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Known and regarded for his straightforward and unassuming manner, Ray provides his clients with a no-nonsense, high-quality service in the areas of accounting, auditing, employee benefit plan auditing, and tax services for private companies.
Ray is a former member of the AICPA Peer Review Board, as well as the PCPS Peer Review Committee. He has served as the Chairman of the AICPA Oversight Task Force for the Peer Review Board, as well as the PCPS Executive Committee and the AICPA Government Audit Quality Center Executive Committee. Ray has been involved in the formation of Professional Standards in the area of quality control and has served on the AICPA Ethics Committee.
Ray is a member of the American Institute of Certified Public Accountants (AICPA), the New Mexico Society of Certified Public Accountants (NMSCPA), the AICPA Government Audit Quality Center, and the AICPA ERISA Audit Quality Center.
Professional Designations Certified Public Accountant (CPA)