Not-for-Profit Accounting & Reporting

Financial reporting for not-for-profit (NFP) organizations will change with the Financial Accounting Standards Board (FASB) August 2016 Accounting Standards Update (ASU) 2016-14. The ASU simplifies and improves how an NFP classifies its net assets, the information it presents in financial statements and notes about liquidity, financial performance and cash flow. The new guidance affects NFPs and users of their general purpose financial statements. NFPs affected include charities, foundations, colleges and universities, health care providers, religious organizations, trade associations and cultural institutions.

The ASU marks the completion of the first phase of a larger project. Phase 2 will focus on whether to require an intermediate operating measure, realigning the statement of cash flows to better align operating cash flows with an operating measure on the statement of activities and considering an alternative of segment reporting for NFP health care entities.

In April 2016, FASB added a project to clarify existing guidance on the revenue recognition of grants and contracts and address difficulty and diversity in practice among NFPs by:

  • Characterizing grants and similar contracts as nonreciprocal transactions (contributions) or reciprocal transactions (exchanges)
  • Distinguishing between conditions and restrictions for nonreciprocal transactions

In addition to industry-specific guidance, NFPs must stay abreast of all standards issued by FASB. As with private companies, NFPs don’t meet the definition of a public business entity and are at times afforded exceptions to ease the implementation guidance of new standards or issued alternative guidance altogether. Additional guidance on accounting and auditing topics can be found here.

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