August 19, 2016; Associations Now
It’s no secret that nonprofit accounting can be confounding, so many rejoiced when the long-awaited Accounting Standards Update (ASU) to the Financial Accounting Standards Board (FASB) guidelines for nonprofit accounting were released late last week. The release culminated a six-year process that included many stakeholders, including experts and practitioners of nonprofit accounting. This is the first such update in 20 years.
FASB Chair Russell Golden described the issues the group addressed and the new guidelines in a press release.
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While the current not-for-profit financial reporting model held up well for more than 20 years, stakeholders expressed concerns about the complexity, insufficient transparency, and limited usefulness of certain aspects of the model. The new guidance simplifies and improves the face of the financial statements and enhances the disclosures in the notes—which will enable nonprofits to better communicate their financial performance and condition to their stakeholders while also reducing certain costs and complexities in preparing their financial statements.
The details and practical implications of the new guidelines will be explored later this week in an NPQ interview with Hilda Polanco, but for now, we can say that the major changes were made in the following areas:
- Net Asset Classes
- Investment Return
- Liquidity and Availability of Resources
- Presentation of Operating Cash Flows.
As we all know, accounting practices influence the ways we manage and tell our organizational stories to donors and other stakeholders. Polanco is a skilled translator of financial-speak and will be able to walk executives and board members through each change.
On September 13, 2016, the FASB will host a live webcast from 1:00 to 2:15 p.m. EDT at which FASB member Larry Smith will discuss the changes. To register, click here.—Ruth McCambridge