For the first time in 20 years, the Financial Accounting Standards Board has updated guidelines specific to nonprofits. This is what you need to know:
- Net-asset classifications:
- Old – unrestricted (including board-designated), temporarily restricted and permanently restricted.
- New – net assets with donor restrictions, net assets without donor restrictions.
>> The focus is on determining what net assets of an organization are not subject to donor restrictions and to inform people what funds are available for operations.
- Disclosures about the liquidity of an organization and how an organization manages liquid assets.
>> The focus is to determine how much cash or assets, which can convert to cash in the next year, can be used for operations.
- Enhanced information about investment returns and expenses.
- Changes to the presentation of the statement of cash flows.
These changes will be in effect for annual financial statements beginning after Dec. 15, 2017. (For instance, a Dec. 31 year-end will be reported first under the new rules for the 2018 annual statements.)
The changes are intended to reduce the complexity of nonprofit accounting, increase transparency over management of liquid funds and investments, and to simplify the statement of cash flows.
For more information on the new accounting standards, please contact Kevin O’Leary at 414-892-3215. O’Leary & Anick is already preparing for the changes and will help ensure you are compliant.