Implementing ASU 2016-14: Board-Designated Net Assets

Posted on 02.12.19

Implementing ASU 2016-14: Board-Designated Net Assets

By Matt McDonald, CPA/CFF, CFE, Business Assurance & Advisory Services Partner | Not-for-Profit Team

ASU 2016-14: Liquidity and Availability Disclosures 

Last fall, Keiter published a three part series on the Presentation of Financial Statements for Not-for-Profit Entities related to the implementation of ASU 2016-14.

Part III of the series discussed the new liquidity and availability disclosures of the standard. In particular, it indicated the need to communicate the “availability of financial assets at the balance sheet date.” 


Board Designations

One of the items needing to be disclosed was internal limits imposed by board decisions, which is another way of saying board designations. The Financial Accounting Standards Board considers Board-designated net assets to be net assets with no donor restricts which are subject to self-imposed limits by action of the entity’s governing board.[1] Such items include the following:

  • Funds to be held for future programming
  • Funds to be held for future capital assets
  • Funds to be held as a rainy day or reserve fund
  • Funds to be held and treated as a quasi-endowment fund

If the entity has these types of limitations on its funds, the entity needs to consider the disclosure requirements established by the ASU, including: disclosing the purpose of any board designations; the amount of the designation; and the qualitative and quantitative impact these designations have on the overall liquidity of the entity.  By considering the necessary disclosure (which may also include drafting potential footnotes), management and the governing board can evaluate how such designations impact the nonprofit’s “story” pertaining to liquidity. If the story needs to be “edited”, the entity can modify or even remove some or all of its board designations to better tell its story.


[1] ASC 958-210-20

Questions on this topic? Contact our your Keiter representative or our Not-for-Profit Team | Email | 804.747.0000.


Additional Not-for-Profit Accounting Resources:

Financial Statements of Not-For-Profits: Changes to Net Asset Classifications( Part I)

Financial Statements of Not-For-Profits: Changes to Net Asset Classifications (Part II)

Functional Expense Allocation Methods Not-For-Profits Should Know (Part IV)

Not-For-Profit Functional Expense Reporting: Management and General (Part V)

Statement of Cash Flows and Investment Return Changes: Impact on Nonprofits (Part VI) 

Not-for-Profit Blog

The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Posted by: Matthew O. McDonald, CPA/CFF, CFE

Matt has over 20 years in public accounting providing audit, tax, consulting services, and financial forensic investigations for a variety of businesses, including multi-state privately held businesses and companies with single location operations. Areas of specialization include the multi-family housing industry, real estate, construction, not-for-profit organizations, retail, and manufacturing clients. Read more of Matt’s accounting insights on our blog.

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