In recent meetings of the Financial Accounting Standards Board (FASB) Not-for-Profit Advisory Committee, the group focused on ways to improve the financial reporting model for not-for-profit organizations.
These proposed improvements, if implemented, are expected to make the financial statements of NFP organizations more meaningful and useful to stakeholders. They have identified four areas for further consideration which include:
- Improving the net asset classification scheme, in conjunction with improving how liquidity is portrayed in the statements and related notes.
- Improving the statements of activities and cash flows to more clearly communicate financial performance.
- Developing a framework for the Board and management to provide commentary and analysis about the organization’s financial health, operations and liquidity. The objective would be to help the NFP better communicate with stakeholders and “tell its story” financially.
- Improving the relevance and understandability of NFP-specific disclosures.
Based on these areas of focus, the sector can look forward to changes and improvements in financial reporting in the future. For more information, visit the FASB’s Website.