1. Not-For-Profit GAAP Update
Ken Meadows
Greene Finney, LLP
May 30, 2019

3. ASU – Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities

4. Key Changes in NFP Financial Statement Standard
Net Asset Classes
Liquidity and Availability
Expense Reporting
Underwater Endowments
Investment Returns – Net Reporting
Statement of Cash Flows

5. Net Asset Classifications

6. Net Asset Classifications
Two Classes
Donor/grantor-imposed restrictions
Includes perpetual (no longer use “permanent”) and temporary
Without donor/grantor-imposed restrictions
Includes board designated net assets
Disclosure Requirements
Composition of donor/grantor-imposed restrictions
Emphasis of how/when net assets (resources) can be used
Specific purpose
Specified time
Perpetual (endowment)
Quantitative and qualitative information about board designations

7. Net Asset Classifications
Board Designations
Disclosure of nature and amounts of board designations of net assets
Defined as:
Net assets without donor restrictions subject to self-imposed limits by action of the governing board
Board designated net assets may be earmarked for future programs, investment, contingencies, purchase or construction of fixed assets, or other uses
Governing boards may delegate designation decisions to management, in which case such designations are to be include in board designated net assets
Recommend that NFPs have policies regarding board designations of net assets

8. Net Asset Classifications Board Designations of Net Assets

9. Liquidity & Availability
Disclosure in notes: Qualitative information on how a NFP manages its liquidity to meet cash needs for general expenditures within the upcoming year
Disclosure in notes or balance sheet: Quantitative information that shows the availability of financial assets at year end to meet the cash needs for general expenditures within the upcoming year
Availability may be affected by:
Nature of assets (receivables vs. cash)
External limits imposed by donors, laws, or contracts
Internal limits imposed by board decisions

10. Liquidity and Availability Quantitative Disclosure

11. Liquidity and Availability Qualitative and Quantitative

12. Liquidity and Availability Qualitative and Quantitative

13. Expense Reporting
Present an analysis of expenses by function and nature in one location
May be presented as a separate statement, in the statement of activities, or presented in the notes
Disaggregation of functional expense classifications by their natural expense classifications
Disclose the method used to allocate costs among program and support functions
Improved guidance about management and general expenses

14. Expense Reporting In the Notes or Separate Statement

15. Expense Reporting Statement of Activities

16. Expense Reporting Disclosure of Allocation Methods

17. Comprehensive Example
Available on the AICPA Not-for-Profit Section website
Not-for-Profit Section

18. Additional Information
The AICPA’s Not-For-Profit section has additional guidance and webcasts dealing with the new standard
Can be found at

19. ASU – Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made

20. Determining Whether Transactions are Contributions or Exchanges
Exchange – Resource provider receives commensurate value in return for the resources transferred
Contributions
Unconditional – recognized at receipt
Conditional – recognized when condition has been achieved

21. Revenue from Contracts with Customers(Topic 606) ASU 2014-09 and subsequent related ASU’s

22. Revenue Recognition Step 1 – Identify the contract(s) with a customer
Step 2 – Identify the performance obligations in the contract
Step 3 – Determine the transaction price
Step 4 – Allocate the transaction price to the performance obligations in the contract
Step 5 – Recognize revenue when (or as) the entity satisfies a performance obligation

23. ASU – Leases (Topic 842)

24. Lease Accounting Overview
Entity should recognize assets (right to use asset) and liabilities (liability to make lease payments) for all leases with terms greater than 12 months
Leases will either be finance leases (most leases other than property) or operating leases (land, buildings, or part of a building)
Right-of-use asset and lease liability recognized on the Balance Sheet and measured at the present value of the lease payments

25. Lease Accounting Overview
Finance Lease – Income Statement
Right to use asset amortized over the lease term
Interest expense recorded using the effective interest method
Operating Lease – Income Statement
Lease expense includes the unwinding of the discount on the lease liability together with the amortization of the right to use asset; total payments divided by the lease term (straight-line basis)