Last year, the Financial Accounting Standards Board (FASB) announced a major update, set to change the way nonprofits report, aimed at helping not-for-profits provide more relevant information about their resources—and the changes in those resources—to donors, grantors, creditors, and other financial statement users. The update, Accounting Standards Update No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, is one that replaces a standard over 20 years old and will pose some challenges to nonprofits as they change the way they report. Today, we would like to provide you a very brief overview of the standard and invite you to a live event to learn more.
The Two Phases of NFP Reporting Rules Changes
The new standard began taking shape after FASB formed its Not-for-Profit Advisory Committee (NAC) in 2009 in an effort to keep the board informed on not-for-profit perspectives in financial reporting. The NAC advised that certain areas of the not-for-profit financial reporting model could be improved. This is expected to be broken into two phases, Phase I, taking place at the end of this year, and Phase II, which is currently being discussed.
Phase I Changes
On August 18, 2016, the FASB issued ASU 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial statements of Not-for-Profit Entities. This update was designed to improve the ways that nonprofits told their stories, aiming to
- Streamline the net asset classification scheme
- Add new disclosure requirements regarding information useful in assessing liquidity and availability of resources,
- Present an analysis of functional expenses by their natural classifications
- Present investment returns net of external and direct internal investment expenses.
Scheduled to start for fiscal years beginning after December 15, 2017, the new reporting standards mark a significant change in processes, one of the most significant since the last reporting update in 1993.
Phase II (Not Finalized)
Phase II focuses specifically on operating measures and statement of cash flows. While still not finalized, Phase II 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.
Live Event: Join Wipfli on November 16 for Understanding the New Not-For-Profit Financial Reporting Standards
While we will discuss this new standard in depth in upcoming blogs, we are excited to announce a live event for NFP organizations in Washington DC looking to understand and transition to the new standard. On November 16, 2017, Wipfli, LLP will present Understanding the New Not-For-Profit Financial Reporting Standards, which hopes to help NFP leaders prepare for the new standard.
At Understanding the New Not-For-Profit Financial Reporting Standards, John Nihill, partner in Wipfli LLP’s audit and accounting practice, will share with attendees the following and more:
- Understanding the main components of the new standard
- Review examples of what the changes will look like
- Discover strategies and timing for implementation
Understanding the New Not-For-Profit Financial Reporting Standards will take place on Thursday, November 16, 2017 from 11:30 AM to 1:30 PM at Old Ebbitt Grill, 675 15th Street, NW, Washington D.C, 20005. The event will cost $35 and include lunch.
This event is now over, contact us to learn more!