On August 18, 2016, the Financial Accounting Standards Board issued a standard that affects all not-for-profit entities issuing GAAP-basis financial statements. The new standard simplifies and improves how a not-for-profit entity classifies its net assets as well as the information it presents in financial statements and notes about its liquidity, financial performance and cash flows.
One goal of the standard is to improve how not-for-profits (like charities, foundations, colleges and universities, health care providers, religious organizations, trade associations and cultural institutions) communicate their financial performance and condition to their stakeholders.
Why a New Standard?
The current not-for-profit financial reporting model has held up well for more than 20 years, however, the FASB’s Not-for-Profit Advisory Committee and other stakeholders have reported that, while existing standards were sound, they could be improved to provide better information to users of not-for-profit financial statements.
Specifically, stakeholders voiced concerns about the following issues: