As we reported at the time, in 2016, the FASB issued an accounting standards update (ASU) that will significantly change the way non-profits deal with financial reporting. ASU 2016-14, entitled Presentation of Financial Statements of Not-for-Profit Entities, is designed to help non-profits to more effectively “tell their story through their financial statements.”
Originally issued in August of 2016, the changes presented by the update are effective for December 31, 2018 year end organizations. The time is now to be sure that your not-for-profit entity (NFP) is prepared to be in compliance with the new standard.
In the April 2017 edition of The CPA Journal, MBAF’s Robert Dyson, along with colleague Travis Carey, provided an in-depth analysis of the update, and how it affects the presentation of non-profit financial statements, particularly in regards to liquidity and the availability of resources, financial performance, and cash flow. According to the piece, the update contains changes in reporting requirements that will significantly affect how non-profits communicate with stakeholders, such as, it “reduces the number of classes of net assets from three to two, requires the presentation of expenses in both natural and functional classifications, and eliminates the requirement to prepare a reconciliation in the statement of cash flows when applying the direct method. It also revises the definitions of certain terms, which are presented in the sidebar, Changes in the Master Glossary.”
More recently, we have produced an informative Webinar on this topic.
How MBAF Can Help
ASU 2016-14 represents the most significant changes in reporting standards for NFPs in the last 20 years. While the changes were designed to simplify financial reporting for NFPs – and in the long run, they will – getting used to the new requirements could still be complex. There are changes that impact:
- Net assets
- Investment returns
- Liquidity and availability – both qualitative and quantitative
- Functional expenses
- Cash flow
- …and more
Our non-profit experts are well familiar with the details of the new reporting standard, and can help you to prepare you financial statements and reporting documentation now, well in advance of the December 31, 2018 implementation.
Implementing the provisions of ASU 2016-14, can be quite complex. If you would like to benefit from our expertise in these areas or if you have further questions on this Advisory, do not hesitate to contact our Non-Profit specialists, or call us at 1-800-239-1474.