Not-for-Profit Financial Reporting

Chapter 1Financial Reporting

Learning objectives

• Identify the two classes of net assets.
• Identify the basic financial statements prepared by not-for-profits (NFPs).
• Identify various reporting formats used by NFPs.
• Identify reporting issues related to investments and endowments.

Introduction

This chapter will discuss what basic information NFP entities must report in their financial statements. We will also discuss some of the reporting formats used by NFP entities.

FASB Accounting Standards Update (ASU) No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, was released on August 18, 2016. This ASU changes the way all NFPs classify net assets and prepare financial statements. 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. Early application is permitted.

This chapter will cover the major accounting and financial reporting requirements under ASU No. 2016-14.

Net assets

Is there a difference between a class of net assets and a fund? Yes! A fund has a self-balancing set of accounts with assets, liabilities, and fund balance accounts, whereas net assets simply represent the difference between assets and liabilities.

How an entity maintains its internal records is not an issue addressed by FASB. Instead, FASB Accounting Standards Codification (ASC) 958, Not-for-Profit Entities, requires that information about ...