Renee Bishop, CPA

Requirements of FASB’s Final ASU Topic 958: Presentation of Financial Statements of Not-for-Profit Entities


On August 18, 2016, FASB issued ASU 2016-14 to make certain improvements to the current net asset classification requirements and the information presented in the financial statements and notes about a not-for profit entity’s (NFP’s) liquidity, financial performance, and cash flows.

The main provisions of this ASU require an NFP to:

  • Present two classes of net assets on the face of the statement of financial position, net assets with donor restrictions, and net assets without donor restrictions, as well as the amount for total net assets as currently required. To enhance readers’ understanding of the donor restrictions, note disclosures will be required to include the timing and nature of the restrictions, as well as the composition of net assets with donor restrictions at the end of the period. The disclosures will continue to show an analysis by time, purpose, and perpetual restrictions.
  • Present the amount of the change in each of the two classes of net assets on the face of the statement of activities, and the amount of the change in total net assets for the period.
  • Present an analysis of expenses by both function and natural classification on a separate statement, on the face of the statement of activities, or in the notes, and disclose the method(s) used to allocate costs among program and support functions.
  • Provide quantitative information, either on the face of the statement of financial position or in the notes, and additional qualitative information in the notes as necessary, that communicates the availability of an NFP’s financial assets at the statement of financial position date to meet cash needs for general expenditures within one year of the statement of financial position date, and how the entity manages its liquid resources to meet its cash needs within that timeframe.
  • Report investment return net of external and direct internal investment expenses. Disclosure of these netted expenses is no longer required.
  • Continue to present on the face of the statement of cash flows the net amount for operating cash flows using either the direct or indirect method of reporting. However, if the direct method is used, the presentation or disclosure of the indirect method (reconciliation) will no longer be required.
  • Use, in the absence of explicit donor stipulations, the placed-in-service approach for reporting expirations of restrictions on gifts of cash or other assets to be used to acquire or construct a long-lived asset and reclassify any amounts from net assets with donor restrictions to net assets without donor restrictions for such long-lived assets that have been placed in service as of the beginning of the period of adoption (thus eliminating the current option to release the donor-imposed restriction over the estimated useful life of the acquired asset).
  • In addition to the items specifically discussed above, provide the following enhanced disclosures about:
    The purposes and amounts of governing board designations, appropriations, and similar actions that result in self-imposed limits on the use of resources without donor-imposed restrictions as of the end of the period.
    Underwater endowment funds, which include required disclosures of (1) an NFP’s policy, and any actions taken during the period, concerning appropriation from underwater endowment funds, (2) the aggregate fair value of such funds, (3) the aggregate of the original gift amounts (or level required by donor or law) to be maintained, and (4) the aggregate amount by which funds are underwater (deficiencies), which are to be classified as part of net assets with donor restrictions.

The standard is effective for fiscal years beginning after December 15, 2017, and early application is permitted. The standard should be initially adopted only for an annual fiscal period and should be applied on a retrospective basis in the year that the standard is first applied. However, if presenting comparative financial statements, an NFP has the option to omit the following information for any periods presented before the period of adoption:

  • Analysis of expenses by both natural classification and functional classification (the separate presentation of expenses by functional classification and expenses by natural classification is still required). NFPs that previously were required to present a statement of functional expenses do not have the option to omit this analysis.
  • Disclosures about liquidity and availability of resources.

If you have further questions or concerns, please don’t hesitate to contact one of our Not-for-Profit experts, Renee Bishop, Sarah Belliveau, Mark LaPrade or Tammy Michaud, today.