Financial Accounting Standards Board (FASB) Updated Not-For-Profit Financial Statement Standard


On August 18, 2016 the Financial Accounting Standards Board (FASB) issued the updated standard for the Presentation of Financial Statements of Not-For-Profit Entities. The amendments in this update will affect all Not-For-Profits (“NFPs”) and the users of the financial statements for fiscal years ending December 31, 2018.

How Does This Impact You?

The intent for the update is to improve the usefulness of information that is being provided to donors, grantors, creditors and other users of a NFPs’ financial statements.  FASB’s goal was to reduce complexities and the costs for preparers of the financial statements. The major change in eliminating the distinction of a donor-imposed net asset as restricted or temporarily restricted will certainly aid in reducing the complexity of the statement of financial position, as well as removing the confusion around the term “unrestricted net assets.” This standard also addresses deficiencies in the clarity of information surrounding the NFP’s liquidity and reason for the restriction of certain net assets.  The main provisions of the NFP standard update are as follows:

Net Asset Classification

Replace the existing requirements to present three classes of net assets (Unrestricted, Temporarily Restricted and Permanently Restricted) on the face of the statement of financial position with two classes of net assets (1) without donor restrictions and (2) with donor restrictions.  The NFP will also reflect on the face of the statement of activities the change in each of the two classes of net assets.

Statement of Cash Flows

NFPs will continue presenting on the face of the financial statement of cash flows the net amount for operating cash flows using either the direct or indirect method of reporting but no longer required when using the direct method to present the indirect reconciliation.

Investment Return

NFPs will now report investment return net of external and direct internal investment expenses and are no longer required to disclose the netted expenses.

Enhanced Disclosures

The update will require the NFP to enhance disclosures to further the readers’ understanding of the financial statements regarding:

  • Amounts and purposes of governing board designations of certain net assets.
  • Details regarding the composition of net assets with donor restrictions at the end of the period and how the restrictions affect the use of resources.
  • Qualitative and quantitative information on the NFP’s liquid resources available to meet cash needs for general expenditures within one year of the balance sheet date.
  • Amounts of expenses by both their natural classification and their functional classification. This should be provided in one location on either the face of the statement of activities, a separate statement or in the notes to the financial statements.
  • Methods used to allocate costs among program and support functions.
  • Additional disclosures and presentation of underwater endowment funds.


For most organizations, the time of implementation is now.  The new disclosure requirements will require significant consideration and planning to ensure they are enhancing your organization’s story.  The financials will tell the reader more about your organization, its net asset structure and its availability of resources to meet cash needs.   It is important you consider and understand how some of these changes could impact the perception of your organization and its ability to continue providing services in the future.

Whether you work for a NFP as the executive director or finance officer or serve on the board of directors, this is an important consideration and discussion to be having as an organization.

To hear more about the NFP financial statement changes, we invite you all to attend our complimentary 2019 Nonprofit Conference on Tuesday, January 8 in Syracuse, NY.  We will be discussing this topic as well as other impactful discussions affecting the NFP industry today.  Register online today at