FASB Panel Recommends Improvements in Standards For Nonprofits
by Victoria Majors Jones, CPA on 09/26/11
The NAC heard feedback for recommendations for the FASB to add to its standard-setting agenda. The FASB established the NAC in 2009 to serve the board with input from the nonprofit sector on existing guidance, current and proposed technical agenda projects, and longer-term issues affecting those organizations. The FASB has not considered the recommendations made by the NAC yet.
The NAC recommended several possible FASB standard-setting agendas to make financial reporting more useful for users of financial statements of nonprofit entities. Some of the possible agenda items include:
Net asset classes. Revisiting current net asset classes in current nonprofit financial statements. Many users of financial statements have found certain categories to be confusing over the years. Credit analysts use these classes to determine liquidity. There was concern that GAAP presentation does not provide useful information to make conclusions on liquidity.
Form of financial statements. Looking at the form and format of financial statements for better disaggregation about reporting financial performance and cohesion across the statements. Better disaggregation of operating versus nonoperating aspects of financial performance within the statements of activity and statements of cash flow.
Management Discussion &Analysis (MD&A). There was consensus that this is important for “telling the story” of a nonprofit. The NAC noted that many nonprofits are starting to include MD&A in financial statements, but the committee also expressed a need to re-examine footnote requirements and avoid what some referred to as “disclosure overload.”