Which of the following is a net asset category reported by not-for-profit entities?

Financial Statements of Not-for-Profit Organizations (Issued 6/93)

Summary

This Statement establishes standards for general-purpose external financial statements provided by a not-for-profit organization. Its objective is to enhance the relevance, understandability, and comparability of financial statements issued by those organizations. It requires that those financial statements provide certain basic information that focuses on the entity as a whole and meets the common needs of external users of those statements.

This Statement requires that all not-for-profit organizations provide a statement of financial position, a statement of activities, and a statement of cash flows. It requires reporting amounts for the organization's total assets, liabilities, and net assets in a statement of financial position; reporting the change in an organization's net assets in a statement of activities; and reporting the change in its cash and cash equivalents in a statement of cash flows.

This Statement also requires classification of an organization's net assets and its revenues, expenses, gains, and losses based on the existence or absence of donor-imposed restrictions. It requires that the amounts for each of three classes of net assets—permanently restricted, temporarily restricted, and unrestricted—be displayed in a statement of financial position and that the amounts of change in each of those classes of net assets be displayed in a statement of activities.

This Statement amends FASB Statement No. 95, Statement of Cash Flows, to extend its provisions to not-for-profit organizations and to expand its description of cash flows from financing activities to include certain donor-restricted cash that must be used for long-term purposes. It also requires that voluntary health and welfare organizations provide a statement of functional expenses that reports expenses by both functional and natural classifications.

This Statement is effective for annual financial statements issued for fiscal years beginning after December 15,1994, except for organizations with less than $5 million in total assets and less than $1 million in annual expenses. For those organizations, the Statement is effective for fiscal years beginning after December 15, 1995. Earlier application is encouraged.

ASU 2016-14 NOT-FOR-PROFIT ENTITIES (TOPIC 958): PRESENTATION OF FINANCIAL STATEMENTS OF NOT-FOR-PROFIT ENTITIES

Overview

On August 18, 2016, the FASB completed Phase I of its Presentation of Financial Statements of Not-for-Profit Entities project by issuing ASU No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. The new guidance simplifies and improves how not-for-profit entities classify net assets as well as the information presented in financial statements and notes about liquidity, financial performance, and cash flows.

To that end, the new guidance:

• Improves how not-for-profits communicate their financial performance and condition to stakeholders.
• Reduces costs and complexities in preparing financial statements.
• Provides more relevant information about resources and changes in resources of not-for-profits by simplifying the face of financial statements and enhancing disclosures in the notes.
• Improves users’ assessments of liquidity, financial performance, availability of resources to meet cash needs for general expenditures, service efforts and ability to continue to provide services, and execution of stewardship responsibilities and other aspects of management performance.

Specifically, the new guidance:

• Revises the net asset classification scheme to two classes (net assets with donor restrictions and net assets without donor restrictions) instead of the previous three.
• Enhances disclosures for self-imposed limits on the use of resources without donor-imposed restrictions and the composition of net assets with donor restrictions.
• Updates the accounting and disclosure requirements for underwater endowment funds.
• Requires net presentation of investment expenses against investment return on the statement of activities and eliminates the requirement to disclose investment expenses that have been netted.
• Requires the presentation of expenses by nature as well as function, including an analysis of expenses showing the relationship between functional and natural classification for all expenses.
• Requires qualitative disclosures on how a not-for-profit manages its available liquid resources.
• Requires quantitative disclosures that communicate the availability of financial assets to meet cash needs for general expenditures within one year of the balance sheet date.
• Allows for a choice between the direct and indirect method of reporting operating cash flows; presentation of the indirect reconciliation is no longer required if using the direct method.

The new guidance affects not-for-profit organizations and the users of their general purpose financial statements. Not-for-profit organizations that will be affected include charities, foundations, colleges and universities, health care providers, religious organizations, trade associations, and cultural institutions, among others.

Effective Dates

The amendments in the standard are effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. Application to interim financial statements is permitted but not required in the initial year of application. Early application of the amendments in this Update is permitted.

Additional Information

• Download the Accounting Standards Update
• Read the Press Release introducing the ASU

To Learn More

• Read the FASB In Focus—a summary of the ASU
• Read the FASB: Understanding Costs and Benefits
• Watch Why a New Not-for-Profit Financial Reporting Standard? —a video featuring FASB Member Lawrence Smith, Assistant Director Jeffrey Mechanick, Supervising Project Manager Richard Cole, and Postgraduate Technical Assistants Maria Khrakovsky and Rebecca Miklin.

Have A Question?

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Which is a class of net assets for not

Which of the following is not classified as a support activity reported by not

What are the 3 types of net asset restrictions?

What is net asset classification?