Presentation Of Financial Statements Of Not For Profit Entities
Not-for-profit entities have been using the same reporting model for over 20 years. Over the course of this time, Not-for-profit organizations have come up with their own methods for reporting their operating results. Unfortunately, by doing this these organizations have made reading their financial statements a challenge. Currently, GAAP does not state that Not-for-profit organizations have to follow a particular way to report their operating performance.
FASB has proposed a few changes that will essentially make Not-for-profit financial statements easier to analyze, thus making the financial statements more useful to the end users. The goal is that end users will able to easily see a Not-for-profit organizations liquidity, cash flow and financial performance more clearly. This will allow the end users to determine if a particular Not-for-profit organization is in stable or non-stable financial condition.
The first change that FASB has proposed is the way net assets are reported on the financial statement. Currently there are three classifications: unrestricted, temporarily restricted, and permanently restricted. FASB has proposed there be only two classifications: net assets with donor…