FASB Releases Accounting Standards Update for Presentation of Financial Statements of Not-For-Profit Entities

ASU No. 2016-14 to Impact Not-For-Profit Financial Statements

On August 18^th, 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (2016-14) to refresh nonprofit financial statements. The amendments in this Update 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, following the provisions laid out in the Update, is permitted.

Key provisions of the amendments in this Update are as follows:

• The statement of financial position requires the presentation of two net asset classes (net assets with donor restrictions and net assets without donor restrictions), rather than the currently required three net asset classes (unrestricted, temporarily restricted and permanently restricted).
• The statement of activities requires the presentation of the amount of change in each of the now two required net asset classes (as opposed to the amount of change in each of the currently required three net asset classes).
• The statement of cash flow may continue to use either the direct or indirect method of cash flows, but if the direct method is used a reconciliation to the indirect method is no longer required.
• Enhanced disclosures are required for:
  
  Governing body restrictions
  The composition of net assets with donor restrictions
  Qualitative and quantitative information regarding liquidity
  Amounts of expenses by both their natural classification and their functional classification (several methods are permitted)
  Methods to allocate costs among program and support functions
  Underwater endowment funds

• Investment return is to be reported net of investment expenses with no required disclosure of those netted expenses.
• A Placed-in-service approach is to be used for reporting the activity of gifts of cash or other assets to be used to acquire or construct a long-lived asset, absent explicit donor stipulations.

ASU 2016-14 and other educational resources provided by FASB can be found at www.fasb.org.

How Can Maher Duessel Aid in the Implementation of ASU 2016-14?

We can assist your organization in developing financial statements and disclosures that will address these new requirements and can answer your implementation questions. Please consult your Maher Duessel audit team members or the contacts below to begin this process.

Central Pennsylvania Region – Lisa Ritter, lritter@md-cpas.com

Western Pennsylvania Region - Betsy Krisher, bkrisher@md-cpas.com