The Financial Accounting Standards Board has added two new projects to its agenda aimed at improving financial reporting by not-for-profit organizations.
One of the new projects involves standard-setting, while the other involves research. Both originated from suggestions from FASB’s Not-for-Profit Advisory Committee at a meeting in September (see FASB Mulls Big Changes in Nonprofit Reporting). The two projects were added to the agenda during FASB’s board meeting Wednesday.
“The FASB shares the committee’s belief that, while sound, the existing standards for financial statements of not-for-profit organizations can be updated and improved to provide better information to donors, creditors, and others,” said FASB chair Leslie Seidman in a statement. “As discussed at today’s board meeting, FASB members agree it is time to revisit and refresh the not-for-profit financial reporting model, which is nearly two decades old.”
The standard-setting project will focus on the financial statements and related notes that are unique to not-for-profit organizations. It will re-examine the existing standards for financial statement presentation by not-for-profit organizations with a focus on improving the current net asset classification scheme and information provided in financial statements and notes about an organization’s liquidity, financial performance, and cash flows.
The research project will study other means of communication that nonprofit organizations currently use in telling their financial story. Specifically, the project will review best practices followed by not-for-profit organizations in this area and how such communications enhance the understanding of donors, creditors, and other stakeholders about the financial health and performance of the organization. It will also determine whether FASB, through its leadership or standard-setting efforts, can contribute to promoting such communications.
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