On Thursday August 18, 2016 the Financial Accounting Standards Board (FASB) issued new guidance on financial reporting for nonprofit organizations. The FASB is the governing body responsible for developing the financial statement standards used by the accounting profession. The new rules affect charities, foundations, colleges and universities, health care providers, religious organizations, trade associations, and cultural institutions.
The changes are intended to improve the usefulness of information to stakeholders presented in financial statements and notes about the organization’s liquidity, financial performance, and cash flows.
FASB Chair Russell G. Golden said “While the current not-for-profit financial reporting model held up well for more than 20 years, stakeholders expressed concerns about the complexity, insufficient transparency, and limited usefulness of certain aspects of the model. The new guidance simplifies and improves the face of the financial statements and enhances the disclosures in the notes—which will enable not-for-profits to better communicate their financial performance and condition to their stakeholders while also reducing certain costs and complexities in preparing their financial statements”.
I expect to post more on the practical implications of these changes on small nonprofit organizations here in the near future. (First I need to preview the 270 page document and some third-party commentary).
For more information on improving performance of nonprofit organizations, request a copy of my booklet “What every nonprofit board member should know”. It is free to officers and directors of nonprofit organizations.