On April 22, 2015, the Financial Accounting Standards Board (“FASB”), in Proposed Accounting Standards Update (ASU) No. 2015-230, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities, made available to the public its first major proposed changes to not-for-profit accounting in over 20 years. The goal of the FASB is to improve the usefulness of not-for-profit financial statements to the various stakeholders, including management, directors, lenders, and donors.
A preliminary review of the proposal indicates changes include, but are not limited to, the following:
- A simplification of the net asset classification scheme with enhanced disclosures,
- A presentation of two measures of performance in the statement of activities – available amounts that have been generated by or directed at carrying out the mission of a not-for-profit organization in the current period, both before and after any governing board actions affecting that availability,
- A requirement for the statement of cash flows be presented using the direct method of reporting, and
- A requirement for disclosures that deal with a not-for-profit organization’s liquidity and how it is managed.
The full proposal can be accessed on the FASB website (http://www.fasb.org/home) and comments on its contents are being accepted through August 20, 2015. Keiter will have a thorough analysis of the proposal in its May 2015 Not-For-Profit newsletter.
Richard Lewis is an assurance partner at Keiter and has over twelve years of accounting and auditing experience in both corporate and public accounting. He provides audit and assurance services in a variety of industries including non-profit organizations such as foundations, religious entities, private schools, membership, and voluntary health and welfare organizations. He supervises some of our larger non-profit engagements that include A-133 audits. Read more of Richard's insights on our blog.