FASB Readies Scaled-Back Accounting Changes for Nonprofits

FASB nonprofitsRecently, for the first time in two decades, the Financial Accounting Standards Board (FASB) proposed substantial changes for nonprofit companies.  These changes include simplified net asset classification, clearer note disclosures to better evaluate liquidity, detailed expense reporting, and a more comprehensible statement of cash flows.  Instituting these changes is intended to improve not-for-profit financial statements in a way that would better serve financial statement users.

Many of the reporting modifications were tightly embraced; the change from a three-tiered net asset section to a two-tiered one is a win-win for preparers and users alike.  However, FASB still faced considerable opposition to the broad changes.  The dissent was in the details.  For example, while many supported the idea of an easier to understand statement of cash flows, others suggested the proposed change (which included dividends reported as an investment activity versus an operating activity) would only cause confusion.  Some even argued that the statement of cash flows is of little use to key users such as creditors and donors, resulting in useless changes to that statement.

In response to the divergent reactions toward the changes, FASB broke the project down into two phases.  Phase 1 will provide immediate, direct improvements to not-for-profit financial reporting.  Phase 1 will classify net assets only as “restricted” or “unrestricted,” report expenses by function, and change how liquidity is illustrated on the balance sheet.  Since FASB looks to align the way nonprofits report financial statements with the for-profit model, Phase 2 will depend on the time frame for applying changes to for-profits.

The final Accounting Standards Update (ASU) is expected to be published later this summer.  The Board has set the amendments to be effective for fiscal years beginning after December 15, 2017, and for interim periods beginning after December 15, 2018.  Early adoption would be permitted.

If you have questions about this ASU, or would like to request a speaker on this topic for your organization or event, contact one of our executives listed below, (800) 270-9629.


Mike Shamblin

Mike Shamblin

Managing Principal of Audit & Assurance Services

Matt Neilson

Matt Neilson

Principal

Related Posts
In the nonprofit world, organizations are fueled and sustained by generous contributions and grants, which are used to support the organization’s mission.  Although such funding can often be the deciding...
Read More

“Threading the Needle”—Accounting Standards Update Closes Hole in Nonprofit Grant Guidance

PYA, a national professional services firm headquartered in Knoxville, has been awarded a 2018 Top Workplaces honor by the Knoxville News Sentinel. The award is a result of employee feedback...
Read More

Knoxville News Sentinel Names PYA a Winner of the Greater Knoxville Area 2018 Top Workplaces Award

A recent Accounting Standards Update (ASU) addresses land easements and their accounting under the new lease standards.  In January 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-01 Leases:...
Read More

Land Easements—Guidance for Implementing New Lease Accounting Standards

Stakeholders seeking clarity were behind the latest Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB).  In response to questions raised, the FASB released ASU 2018-03: Technical...
Read More

Measuring Fair Value: New ASU Offers Clarity

Businesses are increasingly reliant on technology to achieve organizational objectives. However, with the convenience and efficiency of technology come intensifying risks of data loss and theft. High-profile data breaches top...
Read More

Cybersecurity Framework “SOCs” It to Cyber Threats

The Financial Accounting Standards Board (FASB) has set forth amended guidance aimed at simplifying and reclassifying certain features of financial instruments. Accounting Standards Update (ASU) No. 2017-11 – Earnings Per...
Read More

The Update on Down Round—FASB Reclassifies Earnings Per Share

The new Tax Cuts and Jobs Act is bringing sweeping reform to the United States tax code. While recent tax reform has drawn considerable media attention to domestic corporate tax...
Read More

The Bottom Line: How Will Recent Tax Reform Impact You?

PYA is pleased to announce the promotions of Michael Ramey, Matt Stuart, and Jeff Pate to the level of Equity Principal. PYA has announced the promotion of Senior Manager Michael...
Read More

PYA Announces Three New Equity Principals

In today’s business environment, cloud computing arrangements play a key role in the day-to-day operations of companies large and small. The Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU)...
Read More

Clearing Up Cloud Computing Accounting

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop