FASB releases exposure draft on overhaul of NPO financial reporting

FASB has released the long-awaited revision to reporting by nonprofit organizations.

The FASB’s press release can be found here.

The document along with a link is: Proposed Accounting Standards Update- Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954) – Presentation of Financial Statements of Not-for-Profit Entities.

The exposure draft has 11 pages of summary and questions respondents, 210 pages of amendments to the codification, and 39 pages of background information & basis for conclusions.

The FASB press release contains the following high-level summary of the changes:

  • Better reflect financial performance in the statement of activities by showing—in two measures of operating performance—available amounts that have been generated by or directed at carrying out the mission of a not-for-profit in the current period, both before and after any governing board actions affecting that availability
  • Simplify the existing net asset classification scheme along with enhanced note disclosures
  • Enhance information in the notes to help financial statement users better assess a not-for-profit’s liquidity and how it is being managed
  • Make information about expenses more comparable and useful by requiring that all operating expenses be reported by both function and nature and investment return be reported net of related expenses, and
  • Make the statement of cash flows more understandable by (a) presenting cash flows provided by operating activities using the direct method of reporting, rather than the indirect (reconciliation) method, and (b) classifying cash flows in ways that are more consistent with classifications in the statement of activities.

Comments are due by August 20, 2015.

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