Over the last year or so there has been increasing focus in the not-for-profit (NFP) accounting community on new accounting standards that affect NFP financial reporting. These latest standards are now effective, and NFPs with years ending December 31, 2018 and later are currently faced with the challenge of implementing the changes.
In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-profit Entities. The amendments in this ASU are intended to address many of the perceived issues with financial reporting for NFPs.
This ASU requires significant changes to the way NFP financial statements are presented and introduces several new disclosure requirements. Broadly speaking, these provisions affect (a) net asset reporting, (b) disclosure of liquidity and availability of resources to meet obligations, (c) reporting of expenses, (d) presentation of investment-related expenses, and (e) cash flow statement presentation if using the direct method. The effects that changes in each of these areas will have on an NFP can vary from entity to entity, so it is important to discuss the revised requirements with a qualified accounting professional.
If your NFP has a December 31, 2018 year end and has not already begun efforts to apply these new standards, the time to take action is now. Preparing for implementation will entail adjustments to the basic financial statements and require NFP management to consider which additional information will be needed to prepare the enhanced disclosures. If your NFP has a fiscal year end after December 31, 2018, it’s never too early to begin creating a plan for enacting the changes.
GranthamPoole’s audit team has been closely following this Standard since its release and is well prepared to see you through its implementation. If you have questions about the changes in requirements, or need assistance in your transition, please contact us to learn more.
Bradford C. Hatchett is a member with GranthamPoole PLLC and a recognized leader in the fields of accounting, auditing, and financial consulting. He advises clients in a variety of industries on accounting and auditing matters. In addition to being a Certified Public Accountant, Brad is also a Certified Valuation Analyst assisting clients with mergers, acquisitions, and business valuations. He presently serves as the head of GranthamPoole’s audit division. Please contact Brad at email@example.com or 601-499-2400.
***The above does not represent tax advice. Each situation is fact-dependent, and you should seek the advice of a competent advisor. GranthamPoole PLLC is a provider of tax, accounting, advisory and strategic services, partnering with clients across a broad spectrum of industries and sizes.