Impact of NFP Reporting Model on Board-Designated Net Assets

Higher Education|Not-for-Profit

By Doug Morally

In 2016, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-For-Profit (NFP) Entities.  This comes after nearly 20 years with the current reporting model for nonprofits. 

One of the significant changes impacting nonprofits is the required disclosure of board-designated net assets.  Many organizations’ boards designate a portion of unrestricted net assets for a particular purpose, including construction of a building or long-term capital projects.  Under the new ASU, nonprofits would also be required to disclose information about the amounts and purpose of board-designated net assets without donor restrictions. Currently, there are no required disclosures about these funds, except as they pertain to endowment funds. The proposed Standard requires disclosures for all board-designated funds, including those earmarked for specific future programmatic expenditures, such as for the acquisition or construction of a building. 

As your organization begins to prepare in 2017 for the effective date of this ASU in 2018, make sure board approval and the related spend for board-designated net assets is well documented to meet the new disclosure requirements.

For more information, please contact Schneider Downs or visit the Our Thoughts On... blog.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.