Changes to NFP Reporting Standard Pt. 2

Jill S. G. Palmeter, CPA, Principal (Apr, 2018)

As we communicated in our first thought leadership series article relating to the Financial Accounting Standards Board’s ASU 2016-14, “Presentation of Financial Statements of Not-for-Profit Entities,” the most significant changes of this reporting standard can be summarized in the following areas:

  • Net asset classification, including the new treatment for underwater endowment funds
  • Liquidity and availability of resources
  • Expense reporting
  • Operating measures
  • Statement of cash flows
  • Investment return

Unrestricted (including Board Designated), Temporarily Restricted (by donor; by time or purpose), and Permanently Restricted (by donor with no invasion of historical corpus) net asset categories will be classified into two ones: Without Donor Restrictions and With Donor Restrictions

On the Statement of Financial Position the minimum presentation would be a total for each of the two classifications, and then a total of net assets.  The organization would then be required to present additional detail in the footnotes. Or organizations may choose to disaggregate those classifications on the face of the statement.  An example would be:

Without Donor Restrictions

Undesignated                                                                  3,057,607

Designated by the Board for Operating Reserve          300,000

Designated by the Board for Endowment                15,511,186

Invested in property, plant and equipment, net      21,150,885



With Donor Restrictions 

Perpetual in nature                                                       22,864,750

Purpose restrictions                                                      14,228,316

Time-restricted for future periods                                1,381,825

Underwater endowments                                                 (42,677)




Total Net Assets                                                            $78,461,892


If your organization has all of the above classifications, determine if your financial statement users would find the disaggregation more useful on the face of the statement or in the footnotes.  Either approach is acceptable, along with a brief qualitative description of the components of net assets in the footnote disclosure.

We encourage you to begin examining the components of your organization’s net assets and determine how best to present the information within the confines of the new reporting standard. 


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The information reflected in this article was current at the time of publication. This information will not be modified or updated for any subsequent tax law changes, if any.