Fall into the GAAP: New Not-for-Profit Financial Reporting Standards Issued

As we previously reported, in April 2015 the Financial Accounting Standards Board (“FASB”) circulated a series of proposed changes to generally accepted accounting principles applicable to certain not-for-profit entities in order to provide clearer information to donors, creditors, and other users of financial statements.  On August 18, FASB issued the related accounting standards update.  The new standard is meant to improve the way not-for-profit organizations present and disclose information about net asset classes, expenses, investment return, liquidity and availability of resources, and operating cash flows. Among key changes, the new standards:

•  replace the existing three classes of net assets (unrestricted, temporarily restricted, and permanently restricted) with two new classes—net assets with donor restrictions and net assets without donor restrictions;

•  change the net asset classification of so-called “underwater” endowment funds (i.e., a fund for which the fair value of the assets and accumulated returns are less than the historical amount of the gift) and require additional disclosures;

•  require qualitative and quantitative information regarding an organization’s financial resources, liquidity, and liquidity risk; and

•  change how organizations present their expenses and investment return.

The accounting standards update can be found here.  The new standards will be effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018.  Organizations should consult with their auditors regarding how the new standards may affect their financial disclosures.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Patterson Belknap Webb & Tyler LLP | Attorney Advertising

Written by:


Patterson Belknap Webb & Tyler LLP on:

JD Supra Readers' Choice 2016 Awards
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.