As part of the Financial Statements of Not-for-Profit Entities project, the Financial Accounting Standards Board (FASB) plans to issue an Exposure Draft mid-April on a proposed Accounting Standards Update focused on improving:
- Net asset classification requirements, and
- Information provided in financial statements and notes about liquidity, financial performance, and cash flows.
Under the proposal, the current three net asset classes will be reduced to two: with donor-imposed restrictions and without donor-imposed restrictions. (The Board also decided to make conforming changes to the terminology and definitions of the net asset classes.)
In addition, all not-for-profits would be required to report expenses both by their nature and by function.
The proposed changes are required to be applied on a retroactive basis. In the initial year of application of the proposed changes, the annual financial statements would disclose the nature of any reclassifications or restatements and their effect, if any, on the change in the net asset classes for each year or period presented. Application to interim financial statements would not be required in the initial year of application.
Over the course of this project, the Not-for-Profit Advisory Committee and many external stakeholders have provided valuable input to FASB. The Exposure Draft is intended to allow many others to contribute. Based on the expectation that the Exposure Draft will be issued by mid-April, the comment period will conclude on July 31, 2015.
To read more about the project and FASB decisions thus far, and for contact information for board members involved in this project, Click Here.