Changes Coming to Nonprofit Financial ReportingDecember 20, 2011
FASB making changes to Nonprofit Financial Reporting
Here is the latest update on the coming changes to financial reporting in the nonprofit area.
In early November, the Financial Accounting Standards Board (FASB) added two agenda projects. One is a standard-setting project, and the other is a research project. Both are intended to improve financial reporting of not-for-profit organizations. The current not-for-profit financial reporting model, promulgated in the early 1990’s is almost two decades old and the thought is that it is time to refresh it.
The standard-setting project will focus on financial statements and the related notes that are unique to not-for-profit organizations. The project’s goal is to focus on improving the current net asset classification scheme (unrestricted, temporarily-restricted and permanently-restricted net asset classes) as well as reviewing information about an organization’s liquidity, financial performance and cash flows. This is certainly an indication that not-for-profit organizations have become bigger businesses over the past two decades and, while attention to the mission is still the number one purpose of the not-for-profit organization, liquidity, financial performance and cash flow information is needed by the users of their financial statements.
The research project will study other means of communication that not-for-profit organizations currently use in telling their financial story.
Read my previous post on the Financial Accounting Standards Board Nonprofit Advisory Committee.