For the first time in 20 years, the nonprofit accounting standards have been updated.
The Accounting Standards Updates to the Financial Accounting Standards Board were adopted in an effort to improve transparency and reduce the complexities of nonprofit financial statements. The new standards, which were developed over a period of six years following round tables, workshops, interviews, and public comment, will go into effect for financial statements issued for fiscal years beginning after Dec. 15, 2017. Use of the new standards prior to that date is permitted.
FASB admitted that there may be increased costs involved in having the new standards applied, but the improved results were deemed to outweigh those concerns. The biggest changes to the standards are in the following categories:
- The current net asset classification scheme; and
- Information provided in financial statements and notes about the organization’s liquidity, financial performance, and cash flow.
Charities are advised to contact their accountants to determine if any steps should be taken to prepare for the change.
FASB advises that there will be additional changes coming in the future that may include further discussions of cash flows and addressing issues dealing with operating measures.