Proposed FASB Changes to EO Reporting

Recently, the Financial Accounting Standards Board (“FASB”) proposed changes to existing reporting requirements surrounding the net assets of exempt organizations. FASB is aiming to add clarity to exempt organization financial statements by eliminating the three classifications of net assets. Currently, exempt organizations must record net assets as either unrestricted, temporarily restricted, or permanently restricted based on donor imposed restrictions. The tentative FASB guidance would require exempt organizations to report net assets in one of two classes: either net assets with donor-imposed restrictions or net assets without donor-imposed restrictions.

Additionally, the updated guidance would require additional disclosures regarding net asset restrictions that exist as of the date of the Statement of Financial Position. Such disclosures would include details addressing when and how funds can be used. Included in this additional information, would be any Board designated restrictions as well. According to FASB, these changes would provide a more transparent view of an exempt organization’s liquidity to readers/users of nonprofit financial statements.

Please do not hesitate to contact Stacey Bergman at (310) 982-2805 or sbergman@yhadvisors.com if you have any questions regarding the foregoing or if you need any additional information whatsoever regarding the exempt organization advisory and accounting serviceswhich YH Advisors provides.