Resources

By Courtney Brown

With all the recent focus on financial reporting revisions for public and private companies, it may seem that the FASB has neglected to consider nonprofit organizations.  However, with the creation of the Not-for-Profit Advisory Committee (NAC) in October 2009, FASB recently announced its addition of two new agenda projects that will seek a much needed face-lift for an outdated reporting model.

The FASB's announcement stems from a recent meeting held by the NAC and a subsequent submission of numerous suggestions to FASB for possible consideration (featured in a previous article on November 22, 2011).  The two agenda projects, which include a standard-setting project and a research project, aim to refresh and improve the current financial reporting model.  The main issues that will be considered include:

• Revisiting existing net asset classifications and labels while attempting to enhance how liquidity is depicted in the statement of financial position and its accompanying notes.
• Implementing a framework for directors and managers of nonprofit organizations to include their analysis and opinions on the results of operations for the period covered by the report.  This is an effort to present a candid description of the organization's financial position from the viewpoint of management.  It is suggested that this framework be comparable to the "Management Discussion and Analysis" component of a publically traded company's financial statements.
• Refreshing the current nonprofit specific disclosure requirements in attempt to enhance their clarity and appropriateness.
• Revising the presentation of the statements of activities and cash flows to improve comparability and cohesiveness between the financial statements.

According to FASB, the research project will focus on alternative forms of communication that nonprofit organizations utilize to present their ‘financial story'.  FASB plans to study best practices related to such communications and determine how the communications contribute to the understanding of donors, creditors, and other users of the financial statements.  In conjunction with this study, FASB hopes to determine if they can use their standard-setting role to directly improve this piece of the reporting model.

FASB is set to release more information about these agenda projects in the coming weeks.  There could be some significant changes to come in the future and the potential impact has yet to be determined.  These projects are not expected to be tackled until the second quarter of 2012, so we will keep you updated with any pertinent developments as they unfold.