The Soapbox and Toolbox for New York State's Nonprofits

May 15, 2015

New FASB Proposal Brings Sea Change to Nonprofit Financial Reporting

By: Chris Gaetano
Published Date: May 11, 2015

The Financial Accounting Standards Board (FASB) has taken the next step in its bid to update reporting rules for nonprofit organizations, the first overhaul of this area in more than 20 years. The board released an exposure draft, "Presentation of Financial Statements of Not-for-Profit Entities," outlining likely changes, on April 22. It takes aim at several hurdles in current practice, including complexities in how net assets are classified; inconsistencies in how intermediate measures of operations are reported; inconsistencies in the type of information provided about a period's expenses; and misunderstandings about the utility of the statement of cash flows, particularly when reporting operating cash flows.

In a statement, FASB member Lawrence W. Smith said the modifications would "refresh the model in ways that will make not-for-profit financial statements even more useful to donors, lenders, and other users."The proposed changes come as no surprise. According to Candice R. Meth, chair of the NYSSCPA's Not-for-Profit Organizations Committee, the board had been discussing these matters with nonprofits long before it released the exposure draft. The proposal, she said, was the culmination of years of outreach between stakeholders and the FASB, which she commended for maintaining a constructive dialogue.

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