“The proposed ASU contains recommended enhancements to the fundamental reporting model for not-for-profit organizations—a model that has existed for more than 20 years,” stated FASB member Lawrence W. Smith. “We believe that these changes will refresh the model in ways that will make not-for-profit financial statements even more useful to donors, lenders, and other users.”
Many nonprofit organizations and users of financial statements agree that it’s time for an update.
Highlights of the proposed ASU include:
- Requiring cash flow metrics to help measure financial performance
- Changes to net asset classifications to include both those ‘with donor restrictions’ and ‘without donor restrictions’
- Potentially controversial provisions include:
- Transfers relating to operating measures and funds that have been made available by board action
- Indirect vs. direct method of cash flow accounting
- Re-characterization of certain items on the cash flow statement
- Timing for implementation of the new standard, if approved, is still in question
Aronson LLC’s Nonprofit and Association Industry Services Group is monitoring these changes closely and will provide updates as they become available. In the meantime, if you have any questions about nonprofit accounting standards or other issues, please contact your Aronson advisor or Rob Eby at 301.231.6200.
By Rob Eby, Aronson, LLC