What are the accounting standards for nonprofit organizations?
Asc 958 is the primary not for profit accounting standard. It is basically GAAP for nonprofits.
The most recent change to the nonprofit accounting standards was from ASU 2016-14. This was effective for financials ending after December 15, 2017.
nonprofit accounting standards
Nonprofit Financial Statements
ASC 958 governs the financial statements for nonprofits. The not for profit financial statements include:
Statement of Activities
Statement of financial position
Non profit cash flow statement
Statement of functional expenses
Not for profits no longer have to split their assets into three categories on the statement of financial position. You’ve always had to disclose your assets between restricted and unrestricted assets. You used to have to split your assets into temporarily restricted, permanently restricted and unrestricted.
The new guidance in FASB New Nonprofit Accounting Standards update 2016-14 is what changed the way restricted assets are to be disclosed.
Change in Total Net Assets
This also changed the statement of activities. Presenting the change in total net assets is still a requirement. You only have to reconcile two changes in net assets as opposed to the previous 3 categories.
Transparency around liquidity. Under the new nfp accounting standards, not for profits must also provide information about their liquidity. One way to do this is to present a classified balance sheet which shows current and noncurrent assets/liabilities.
Statement of functional expenses is no longer required, but you still may want to present it. Even though the statement of functional expenses is no longer required you still have to break out your expenses into function somewhere in your financial statement. You can do your functional expense break out right on the face of your statement of activities.
Cash Flow statement
Not for profits can still choose which method to present their not for profit cash flow statement. They can choose the direct or indirect method, but they will no longer be required to reconcile to the indirect method if they choose to use the direct method.
Investment expenses must be presented net on the face of the statement of activities.