Life is full of “face it or bury it” decisions. For example, a beloved family member has noticed that someone has consumed the last significant scoop of ice cream from the carton and left only a teaspoon for others in the family to enjoy. Do we face up to the fact that we indeed enjoyed that last scoop of ice cream or do we bury our head in a periodical hoping the question goes away? Well, ASU No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, will pose an entirely different type of “face it or bury it” decisions to not-for-profit entities when it is implemented for December 31, 2018 fiscal year-ends.
ASU No. 2016-14 will require not-for-profits to decide whether certain information will be presented on the face of the financial statements (i.e., we decide to face it) or provided in the notes to the financial statements (i.e., we decide to bury it in the notes). In implementing ASU No. 2016-14, not-for-profits will have to make the following “face it or bury it” decisions:
- Where will we provide information about the nature and amounts of different types of donor-imposed restrictions?
- Where will we provide information about the amounts and purposes of board-designated net assets?
- Where will we provide functional expense information?
- Where will we provide the analysis of expenses by function and nature?
- If we present an operating measure in the statement of activities and it is impacted by internal transfers (e.g., internal board designations, appropriations, and similar actions), where will we present information regarding those transfers?
Not-for-profits should answer the above questions primarily by looking at their unique financial statement users. Would their financial statement users benefit from seeing this information on the face of the financial statements or is a more useful presentation achieved by presenting this information in the notes? Burying something in the notes is not always a bad idea. Just like hiding in a periodical to avoid the disappointed glance from a family member may be your best move.
Interested in learning more? Sign up for Surgent’s upcoming webinar, The Essential Course for Preparing Not-for-Profit Financial Statements Under ASU No. 2016-14 (ENFP). Earn CPE and obtain a strong, working knowledge of ASU No. 2016-14 and other issues surrounding government and not-for-profit accounting and auditing.
Charlie Blanton, CPA is Senior Director of Governmental and Nonprofit Content for Surgent CPE, where he authors Surgent’s government and not-for-profit CPE courses and is a frequent webinar instructor. Charlie has over 25 years of experience in auditing and industry having worked at KPMG, the Texas Society of CPAs, Taylor Publishing, Texas Wesleyan University, and the AICPA.