As December 31, 2018, draws nigh, not-for-profits are thinking more and more about the implementation of ASU No. 2016-14, Presentation of Financial Statements of Not-for-Profit Entities. Under ASU No. 2016-14, not-for-profits continue to be required to provide information about expenses by their functional classification either on the statement of activities or in the notes to the financial statements. However, all not-for-profits will also be required to provide information about expenses by their nature. NFPs will have the flexibility to present expenses by function, by nature, or by both on the statement of activities.
Under ASU No. 2016-14, all NFPs will be required to report information about all expenses in one location either:  on the face of the statement of activities;  as a schedule in the notes to the financial statements; or  in a separate financial statement (e.g., a statement of functional expenses). The relationship between functional classification and natural classification for all expenses is required to be presented in an analysis that disaggregates functional expense classifications (e.g., major classes of program services and supporting activities) by their natural expense classifications (e.g., salaries, rent, electricity, supplies, interest expense, depreciation, awards and grants to others, and professional fees).
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.