Changes for Not-For-Profits Financial Statements

During August of 2016, the Financial Accounting Standards Board (FASB) issued an update relating to standards that govern the financial statements of Not-For-Profit entities. The update becomes effective for all entities whose fiscal year begins after December 31, 2017 for annual financial statements and after December 31, 2018 for interim periods. The guidance seeks to simplify the presentation of net assets on the statements of financial position and activities, while providing more in-depth details of the changes in net assets in the accompanying notes to the financial statements. The current presentation provides for three classifications of net assets, which have now been narrowed into two categories, as illustrated below.

The table below details the difference in presentation before and after the implementation of the new update:

Statements of Financial Position and Activities

Prior to the update: After the update:
Unrestricted Net Assets: These are funds/assets received by the organization available to be used at the discretion of the organization, and were received with no donor-imposed restrictions. Net Assets without Donor Restrictions: These are funds/assets received by the organization available to be used at the discretion of the organization, and were received with no donor-imposed restrictions.
 

Temporarily Restricted Net Assets: These are funds received by the organization from outside donors whose use is restricted relating to either the passage of time or the fulfillment of an obligation by the organization (using the funds for a specific purpose, etc.).

Net Assets with Donor Restrictions: These are funds received by the organizations from outside donors whose use may be either restricted from the passage of time or the donor-designated use of the funds; or be completely restricted and the restrictions can’t be released by the actions of the organization or the passage of time. This is essentially a combination of the temporarily restricted net asset and permanently restricted net asset classifications prior to the FASB update.
Permanently Restricted Net Assets: These are funds/assets received  by the organization that contain donor-imposed restrictions that can not be satisfied by the fulfillment of an obligation by the organization or the passage of time.

 

After the implementation of the update, the notes to the financial statements will in detail how the Net Assets with Donor-Restriction affect the Not-For-Profit entity’s ability to meet their operating expense requirements as well as continue to receive contribution revenue.

For more information on this change, please contact Tony Mueller at tmueller@bwtpcpa.com or 314-576-1350.

Anthony (Tony) Mueller, CPA is an accountant with BWTP P.C.

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