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.