Not-For-Profit Accounting Standards

Almost 20 years after its major overhaul of financial statement presentation by Not-For-Profit entities, the Financial Accounting Standards Board (FASB) is in the midst of a project to evaluate how well existing reporting is working and to make modifications. The FASB has reached some tentative decisions that will make significant changes to not-for-profit financial statements. An exposure draft is expected in the first half of 2014, which would including the following concepts:

  1. Replace the existing requirements to present totals for each of three classes of net assets on the face of a statement of financial position and for changes in each of those classes on the face of a statement of activities with similar requirements for each of two classes of net assets that convey net assets with donor-imposed restrictions and without donor-imposed restrictions.
  2. Modify the current requirement to provide information about the nature and amounts of different types of donor-imposed restrictions to remove the hardline distinction between temporary restrictions and permanent restrictions and focus instead on describing differences in the nature with a focus on both how and when the net assets can be used.
  3. Require disclosure of information about the amount and purposes of board designations of net assets without donor-imposed restrictions.
  4. Require the direct method of reporting cash flows provided/used by operating activities and remove the requirement to reconcile the change in net assets to net cash flows from operating activities.
  5. Report purchase of long lived assets for use in operations as operating outflows, not investing.
  6. Report cash outflows of interest expense and cash inflows of interest and dividends in the investing category.