New non-profit accounting standards

Not – for – Profit Groups Prepare for Major Changes to Guidance for Expenses, Investments

The FASB’s not-for-profit accounting standard is the first major update to not-for-profit reporting in more than two decades, and it aims to lend better insight into how an organization operates and manages its finances. Other changes to the financial reporting by not-for-profit groups may also be in store. The FASB recently published a proposal to clarify when and how to recognize contributions with conditions attached to them, which could mean that organizations will have to adjust when they recognize their revenue.

For museums, charities, and universities, change is coming.

Starting in 2018, these groups and other not-for-profit organizations must overhaul the way they report expenses and investments in their financial statements.

Other changes may be in store further ahead. The FASB on August 3, 2017, released for public comment a proposal that aims to make it easier for organizations to determine how to record the proceeds from grants and donations that have conditions attached to them. While it may not sound as big of a change as a financial statement makeover, the question has dogged financial reporting for years because contributions with conditions attached to them are recognized differently from other types of contributions, and the distinction could affect the timing of the recognition of potentially millions of dollars.

“People need to think about how these different things affect them”, said BDO USA LLP Assurance Director Lee Klumpp. “It could get really ugly for some of these nonprofits, especially if they don’t know what’s coming.”