Wiley Not-for-Profit GAAP 2020

14FUNCTIONAL REPORTING

• Perspective and Issues
• Concepts, Rules, and Examples
  • Functional Classifications
    • Program services
    • Supporting services
    • Support to affiliated organizations
    • Classification of expenses related to more than one function
    • Functional category of cost of sales of contributed inventory
  • Reporting
• Disclosure Requirements

PERSPECTIVE AND ISSUES

Not-for-profit organizations are required to report information about expenses by functional classification either by segregating these amounts in the statement of activities or by disclosing the amounts in the notes to the financial statements. The reporting of expenses provides information about the cost of services provided and how the organization used its support; that is, how much of its funds went to program activity, and how much went to general and administrative and fundraising expenses. This is one of the primary objectives for readers of the financial statements of not-for-profit organizations.

The FASB issued Accounting Standards Update 2016-14, entitled Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, which requires all not-for-profit organizations to report expense by nature and function. All not-for-profit organizations will be required to report information about expenses in one location—on the face of the statement of activities, as a schedule in the notes to the financial statements, or in a separate financial statement. Previously, as discussed ...