mission Matters NFP Reporting Standards: Frequently Asked Questions January 18, 2019 Attention nonprofit organizations…are you well-read on the new financial reporting standards? Be sure to check out a recording of our recent webinar, and check out these questions our listeners submitted. Did you tune into our recent webinar? If you missed it, you can access a copy of our slides and a recording of our session here. Below we cover some questions submitted by our listeners to help clarify some confusing aspects of the new reporting standards. 4 FAQs When an organization implements the new standards, is there a note added to the auditor’s report? In the year of implementation, there will be an additional paragraph in the Independent Auditor’s Report stating:Emphasis of a Matter For the year ended Month ##, 20##, the organization adopted Financial Accounting Standards Board’s (FASB) accounting standards update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, as described in Note #. The changes required by the update have been applied retrospectively to all periods presented. Because of how material this change is to your financial statements, this paragraph will be added to the opinion. Is there any guidance or resources available to help with a cost allocation plan? There are many resources available on the web and the AICPA NFP section membership has some guidance there as well. Many organizations have actually found that the IRS 990 instructions have some pretty good guidance. We also have resources available so feel free to contact us and we can provide you the information we have accumulated. Is there any way to avoid including the liquidity disclosure in the financial statements? An organization always has the option of having a GAAP departure but that may not work in their favor especially if the reasons are related to a going concern and financial stability. Not all states require that financial statements are published online. Thinking about the direction of the nonprofit community, however, transparency is a key factor. Many more states will probably require financial statements to be published and readily available. Is it acceptable to allocate expenses at the end of the year? It is not considered a best practice to allocate expenses only for financial statement and form 990 preparation as you do not have a clear picture of what your programs are costing the organization and what it costs to generate contributions and support. For example, let’s say I have three programs and I’m putting them all in one bucket and then saying “okay I think its 10% for management in general and 50% for program A and program B”. I really don’t have a clear indication of whether my programs are successful and if I should continue funding them. Hence it is definitely something to implement throughout the year. If you’re not allocating expenses on a transaction by transaction basis and doing them at the end of the month, that’s probably ok. It really depends on the resources you have available at your organization. We would definitely recommend doing it on a regular basis and not waiting until the end of the year. Be sure to check out our recording, and check out our blog New Financial Reporting Standards for NFP: 2018 Reminder for a quick summary of the changes.Contact us for any questions.