New FASB Guidelines Finalized for Nonprofit Financial Reporting
Originally published on August 23, 2016
Updated on October 31st, 2023
Earlier this spring, the Financial Accounting Standards Board (FASB) proposed several new guidelines for nonprofits regarding their financial reporting. The aim of these changes was to make reporting practices more straightforward for nonprofits, as well as make their statements more uniform and easy to understand for potential contributors.
FASB announced on August 18, 2016 that these guidelines, classified as ASU No. 2016-14, have been finalized and issued. Among the changes are a reduction in net asset classes from three to two (Net Assets With Donor Restrictions and Net Assets Without Donor Restrictions); an increase in the detail of note information about liquidity assessment; and changes in how underwater endowment amounts are reported.
In addition to those and other areas covered in our last article, the new guidelines require enhanced disclosure information on the amounts and purposes of board-designated net assets. The placed-in-service approach will also be required when releasing restrictions related to long-lived assets; the option to imply a time restriction and release the restriction over the useful life of an asset will no longer be permitted. Additionally, the new regulations will require a net presentation of investment expenses against investment return on the face of the statement of activities.
The new guidelines will be in effect for financial statements for fiscal years starting after Dec. 15, 2017, and for interim periods within fiscal years starting after Dec. 15, 2018. Early application of these new standards is allowed, so now is the time to begin preparing for the changes.
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