By Margaret Karren
The Financial Accounting Standards Board (FASB) has issued an exposure draft for the presentation of financial statements of not-for-profit entities. The comment period ends on August 20, 2015, public roundtables will occur in September and October 2015, and the FASB board re-deliberations would start in October 2015. The FASB states that this is probably two years away from implementation.
The key elements of the proposal are aimed at improving information in the financial statements and notes about liquidity, financial performance and cash flows. The net asset classification would also change. The goal is to “refresh,” not overhaul, the current model.
Liquidity information would be improved by requiring liquidity information in the footnotes or by preparing a classified balance sheet (statement of financial position), separate presentation of assets whose use is limited and additional note disclosure.
Financial performance would be clarified by requiring operating measures on the statement of activities based on whether resources are from or directed at carrying out the nonprofit’s purpose for existence. Including information on whether resources are available for the current period activities and reflecting limits imposed by external donors and the board of directors.
The cash flow statement would require the direct method for operating cash flows (the indirect method would no longer be required. Certain items would be re-categorized to better align operating cash flows with the operating measures.
The complete exposure draft is available on the FASB along with a submission form for your comments. Those submitting comments will be invited to the public roundtable discussion. Make sure you get your comments in by August 20.
About Margaret Karren (Partner at GHJ)
Margaret has over 20 years of experience at the firm and more than 10 years in private industry as a controller. She works exclusively on nonprofit clients. Margaret also sits on the board of several nonprofit organizations, including the California Hospital Medical Center Foundation and is a frequent speaker and guest lecturer on nonprofit issues.