Nonprofits with December 31, 2018 year-ends will be implementing ASU No. 2016-14. As this effective date draws near, many are finding a challenging aspect of ASU No. 2016-14 to be the new disclosures related to: (1) how a nonprofit manages its liquid resources available to meet cash needs for general expenditures within one year; and (2) the availability of a nonprofit’s financial assets at the statement of financial position date to meet cash needs for general expenditures within one year.
When it comes to disclosing how a nonprofit manages its liquid resources available to meet cash needs for general expenditures within one year, keep in mind that ASU No. 2016-14 does not require nonprofits to have a formal plan as to how they manage their liquid resources. However, the implementation of ASU No. 2016-14 is a good time for nonprofits to think about how they manage their liquidity and develop terminology describing what they do that is appropriate for their individual entity.
When it comes to disclosing the availability of a nonprofit’s financial assets at the statement of financial position date to meet cash needs for general expenditures within one year, keep in mind that:  the focus here is just on the asset side of the equation (i.e., we are not thinking about when liabilities are coming due);  financial assets essentially consist of assets that are convertible to cash on a fairly easy basis like cash, receivables, and investments and do not include assets like prepaid expenses, inventory, and fixed assets;  ASU No. 2016-14 does not define the term general expenditures but we are generally talking about financial assets that are available for the core day to day operational costs of the entity (i.e., as opposed to say a financial asset that was restricted to the construction of a building); and  the availability of a financial asset may be affected by several factors including board designations (i.e., board designations can make this disclosure look worse as they can reduce the financial assets that are available for general expenditures).
Interested in learning more? Sign up for The Essential Course for Preparing Not-for-Profit Financial Statements Under ASU No. 2016-14.
Charlie Blanton is the Sr. Director of Government & Nonprofit Content for Surgent Professional Education. He has more than 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. Charlie authors Surgent’s government and nonprofit CPE courses, conducts live presentations, and teaches well over 50 webinars annually in the government and nonprofit arena.