Not-For-Profit Advisory Committee Continues its Focus on Nonprofit Financial Reporting


By Amy Kletch

The Financial Accounting Standards Board (FASB) Not-For-Profit Advisory Committee (NAC) met at the FASB offices in Norwalk, Connecticut on March 1 and 2, 2012.

The NAC continued its focus on the improvement of the presentation of financial information and related notes unique to not-for-profit entities. One of the objectives of the project is to examine existing standards with the intention of improving information related to restrictions imposed on the use of assets and the net asset classification. Additional areas of focus include liquidity, financial performance and cash flows.

The project resource group members began by examining the current classes of net assets in terms of whether or not the reasons for distinguishing between the various classifications (donor-restricted versus unrestricted and permanently and temporarily restricted) were still relevant and most useful.

The group is currently studying how information related to donor-imposed and other restrictions might contribute to decision-useful information, specifically for liquidity and financial performance. Phase two of the project will likely include an investigation of alternative means of reporting. The alternatives will focus on how to communicate liquidity, financial performance and cash flow information in order to better utilize current information with respect to donor-imposed restrictions.

Alternative presentations being considered include:

a.) Reporting of financial performance;
b.) Reporting of operations in the statements of activities and cash flows;
c.) Continuing the use of flexibility in reporting operating results currently allowed in not-for-profit organization financial statements; and
d.) Requiring the financial statements to include a statement of functional expenses for all or certain types of not-for-profit entities. 

The NFP Financial Statements project is projected to result in a final statement by the second half of 2014.

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