FASB's Changes to Nonprofit Accounting Effective SoonSeptember 30, 2017
Accounting standards update (ASU) 2016-14 is effective for annual financial statements issued for fiscal years starting after December 15th 2017—is your nonprofit prepared?
The Financial Accounting Standards Board (FASB) proposed changes to existing nonprofit accounting standards in August 2016. The changes are set to be in effect for tax years beginning December 15, 2017. What can organizations do to prepare?
5 proactive steps for your Board
1. Identify areas that will be affected- Check out our series, “New Financial Reporting Standards for Nonprofits” for more information on this, but the standards will bring changes to statement of cash flows, disclosures about liquidity, net asset classes, investment returns and treatment of investment expenses and classification of expenses.
2. Consider the cost- Take into account that there could be additional staff time, accounting system needs and increased audit costs. In the first year of adoption, the finance staff and independent auditors can provide input on the budget implications.
3. Discuss the implementation plan- Board members are ultimately responsible for fiduciary stewardship of the organization, in other words, all board members have a duty to apply the changes while at the same time staying objective, unselfish, responsible, efficient, honest and trustworthy.
4. Update and approve policies- Organizational polices could change, too, take time to make sure at least one board meeting is held annually to review and approve policies.
5. Review board designations- Due to the fact that financial statements will require disclosure of all board designations and similar self-imposed limits on net assets without donor restrictions, it is a good time for the board to review any existing board-designated net assets.