FASB Proposes Major Changes in Nonprofit Accounting

Thursday, June 4, 2015 Print Email

A planned accounting standards update has been issued by the Financial Accounting Standards Board – FASB that will help to improve the information present in not for profit financial statements and the notes of financial statements that could have a major effect for nonprofit companies.

Lawrence W. Smith, FASB member said in a statement, “The planned ASU holds necessary improvements to the basic coverage model for not-for-profit organizations, as this model is already present from more than 20 years. We consider that these modifications will renew the model in such a way that will make not-for-profit financial statements more helpful for users, lenders and donor.

The document clarifies FASB’s future perfections to existing net asset categorization requirements and information on hand in financial reports and comments to financial reports about a not-for-profit organization’s cash flows, liquidity and financial presentation. Specially, the modifications are needed to give enhanced performance in the financial statements that should have measurement of operating presentation of the on hand amount that have been created by or bound for obtaining the task of a not-for-profit in the present time, both before and after any central board proceedings influencing that accessibility.

The modifications also would make things easier in the on hand net asset categorization format along with improved note revelations. Moreover, the planned modifications would increase information in the remarks to help financial reports users improved review a not-for-profit’s cash flow and financial performance and also how it is being administrated. FASB also desires to create information about expenditures easier and helpful by obliging that all operating expenses are describe by both role and outlook and investment return be described net of connected expenditures.

The accounting standards revision would also formulate the report of cash flows additional comprehensible like describing cash flows presented by operating actions using the direct method of treatment instead of using  the indirect method also called reconciliation method, and also, organizing cash flows in such a way that is extra reliable with categorizations in the report of actions.

Source: ReadyRatios

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