The US Financial Accounting Standards Board’s
(FASB) Not-for-Profit Advisory Committee (NAC) has recommended
accounting rules for not-for-profit organisations are amended to
improve clarity in the reporting of their finances to donors and
other interested parties.
Key recommendations advanced by NAC
- Revisiting current net asset classifications,
and how they may be relabelled or redefined, in conjunction with
improving how liquidity is portrayed in a not-for-profit’s
statement of financial position and related notes
- Improving the statements of activities and
cash flows to communicate financial performance in greater
- Creating a framework for not-for-profit
directors and managers to provide commentary and analysis about the
organisation’s financial health and operations
- Streamlining, where possible, existing
not-for-profit-specific disclosure requirements to improve their
relevance and clarity.
“While NAC members largely agree that
the basic financial reporting model for not-for-profit
organisations is sound, they also believe updates can be made to
improve the overall value of a not-for-profit’s financial reporting
package for users,” NAC chairman and FASB assistant director of
non-public entities Jeffrey Mechanick said.
The FASB is expected to discuss the changes at
a public board meeting later this year.