The Rumored Winds of Change Have Arrived
By Jack Murray, CPA and HoganTaylor Assurance Partner
On April 22, 2015 the Financial Accounting Standards Board (FASB) issued the much rumored and long awaited Accounting Standards Update (ASU), Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954) – Presentation of Financial Statements of Not-for-Profit Entities (proposed update), for public comment. The proposed ASU is available for review here.
We have kept you informed over the last few years as the FASB focused their attention on updating the nonprofit reporting model. The Not-For-Profit Advisory Council (NAC) has been instrumental in keeping the nonprofit agenda moving forward and discussing with various stakeholders areas for improvement and opportunities to improve communication of nonprofit financial condition. We will not report again the changes in this article, but encourage you to read the Exposure Draft and provide feedback to the FASB about how you believe these changes will impact your organization
The guidance in use now was established in 1993 with the issuance of FASB Statements No. 116 – Accounting for Contributions and 117 – Financial Statements of Not-for-Profit Organizations. There have been no significant changes to the basic reporting model in the last 20 years and this standard is the FASB’s proposal to respond to nonprofit and stakeholder questions about how best to communicate financial reporting. This update does not change the underlying accounting for contributions or net asset restrictions but intends to improve the reporting to better allow a nonprofit to tell its story related to its financial position and performance, while increasing comparability over the nonprofit industry.
The primary goals of the standard setting project is to improve the net asset classification requirements for nonprofits and improve the information provided in financial statements about liquidity, financial performance and cash flows.
The proposed update will have a 120-day comment period, which ends August 20, 2015. During the comment period and afterwards, the FASB Board members and staff will conduct outreach and communications with stakeholders. Those communications will include speeches at conferences and workshops, as well as small group meetings for preparers and users in various cities this summer in addition to public roundtables this fall.
We highly encourage you to educate yourself on the ASU itself, listen to as many of these opportunities to hear directly from the standard setters and consider the impact on your financial reporting process. The FASB issues exposure drafts to hear directly from stakeholders and your voice will be heard. Some may feel that as a small nonprofit you do not have a voice in the process, but the FASB does read and consider comments they receive. The process thus far has ebbed and flowed as ideas were raised, some of which were kept, some discarded and many changed as the process evolved.
The FASB Board members and staff will host a free educational webinar (two CPE hours available) on Tuesday, May 12, from 1:30 to 3:10 EDT, which will provide an in-depth look at the proposed Update. Details for this webinar are available on the FASB website. We encourage you to reach out to HoganTaylor’s nonprofit team to discuss any questions, comments or concerns you may have regarding the proposal and how the changes will affect your organization.