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I feel like I should say something…ASU No. 2016-14

We’ve all been there. In a meeting to discuss a significant change that is occurring we sense that we should say something. But what? This scenario closely aligns to what many firms are encountering as they audit the first round of not-for-profits that have implemented ASU No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities. Significant changes are occurring in the financial statements and we sense the need to say something in the audit report.

AU-C section 708, Consistency of Financial Statements, provides that when a change in accounting principle has a material effect on the financial statements, the auditor is required to include an emphasis-of-matter paragraph in the auditor’s report that describes the change in accounting principle and provides a reference to the entity’s disclosure. The wording for the emphasis of matter paragraph could potentially be as simple as “As discussed in Note X to the financial statements, in 2018, Not-for-Profit X adopted Accounting Standards Update (ASU) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. Our opinion is not modified with respect to this matter.”

Interested in learning more? Sign up for The Essential Course for Preparing Not-for-Profit Financial Statements Under ASU No. 2016-14.

Charlie Blanton, CPA is the 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.

I feel like I should say something…ASU No. 2016-14 was last modified: February 25th, 2022 by Charles Blanton, CPA
Charles Blanton, CPA: