Not-for-Profit Notebook

Practical insight and analysis on the accounting, audit and tax issues impacting not-for-profit organizations.

FASB Proposes Reporting Model Changes For Not-For-Profit Organizations

Changes to not-for-profit reporting rules are coming. Are you familiar with the FASB’s proposed new model of reporting for not-for-profit organizations, Presentation of Financial Statements of Not-for-Profit Entities? Currently, the FASB is reviewing comments received for this proposed standard, which was issued in April, and the FASB will consider comments received during a comment period that closed August 20 before setting an effective date. The proposed changes will require retrospective application once adopted.

We have summarized the following areas we consider to be the significant changes outlined in the proposed standard.

New Definition of Restrictions


Say good-bye to the current concept of permanently restricted, temporarily restricted and unrestricted net assets, and say hello to two new categories —  net assets with donor restrictions and net assets without donor restrictions. This change is the biggest and most fundamental change in the  proposal. These classifications would be presented on both the statement of activities and the statement of financial position.

Operating Activities Based on Availability of Funds

Donor restrictions causing funds to be unavailable for the current period would not be included in operating activities. Donor restricted funds would not be part of the operating measure until they are released from donor restriction. Board designated activities would be reflected in the transfer section (see below) of the statement of activities.


The transfers section on the statement of activities would capture reclassifications moving revenues to and/or from operating and non-operating activities. These transfers would be required to be presented on the statement of activities in a separate section immediately following a subtotal of operating surplus/deficit before transfers (intermediate measure).  An intermediate measure of operating surplus/deficit would be presented after such transfers. Disclosures for any transfers would need to provide purpose, amount and type.

Liquidity Disclosure

A not-for-profit would be required to provide certain information regarding liquidity, including a description of the time horizon it uses to manage its liquidity. Information provided would include the total financial assets, amounts that are not available to meet cash needs within the defined time horizon due to various restrictions, and the total of financial liabilities that are due within the defined time horizon. Other information that should be disclosed includes information about how an entity manages its liquidity.

Direct Method Cash Flows

Requires the direct method of reporting cash flows provided or used by operating activities and provides new definitions for operating, financing and investing cash flows.

Expenses by Functional Category

Not-for-profits would be required to report expenses by both their nature and function, either on the face of the statement of activities, in a separate statement, or within the notes.

When the FASB determines an effective date for these changes, we will update you on this topic again.  If you have any concerns about the impact of these proposed changes on your organization, please reach out to our Not-For-Profit Group.