ASU 2016-14 Replaces the Reporting Model That Has Existed for 20 Years
by AICPA Not-for-Profit Section
Published August 18, 2016
After more than three years of debate, comment, and revision, the Financial Accounting Standards Board’s (FASB) much-anticipated Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, was released on August 18, 2016. The ASU will change the way all not-for-profits (NFPs) classify net assets and prepare financial statements. To view the standard in its entirety, visit the FASB’s website.
Adoption of FASB ASU 2016-14 will result in significant changes to financial reporting and disclosures for NFPs. FASB believes the update will improve NFP financial statements and provide more useful information to donors, grantors, creditors, and other financial statement users. The standard is effective for annual financial statements issued for fiscal years beginning after December 15, 2017 and for interim periods within fiscal years beginning after December 15, 2018.
Improvements to NFP Financial Reporting
The first of a two-phase project, the amendments in FASB ASU 2016-14 are intended to make immediate improvements that address:
- Complexity in net asset classification
- Clarity of information regarding liquidity and availability of cash
- Transparency in reporting of financial performance measures
- Consistency in reporting expenses by function and nature
- Utility of the statement of cash flows