Nonprofit Blog

In continuation of our series on the impact of Accounting Standards Update 2016-14, Presentation of Financial Statements of Not-for-Profit Entities (“ASU”), issued by the Financial Accounting Standards Board (“FASB”) in August 2016, this article focuses on the topic of liquidity and available resources.  The ASU requires qualitative and quantitative information on the available cash flow for a nonprofit. These disclosures include the following:

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-14, Presentation of Financial Statements of Not-for-Profit Entities (“ASU”). FASB’s agenda was separated into two phases of which Phase 1 has been included in the ASU. Currently, the FASB does not have a projected timeline for Phase 2. Phase 1 of the financial statement project was initiated in 2011 by the FASB to ensure nonprofit reporting continues to meet the dynamic needs of users. It is important to note that a key objective for this ASU is to allow nonprofit entities to tell their financial story and improve the usefulness of information provided to donors, grantors and other users of the financial statements. Since the issuance of the ASU, many clients and board members have posed the question, “How will these new statements and disclosure requirements be presented and what should we do now, prior to adoption?”  While the ASU provides presentation and disclosure examples which help answer these questions, Smith & Howard will be providing a series of in-depth articles on the changes to financial statement presentation and disclosures set forth in the ASU. At the conclusion of the series, practical recommendations for how to prepare for the changes will be provided. Until the second phase is issued by the FASB, our series will include only the changes set in Phase 1 and will cover the following topics:

An update released by the Financial Accounting Standards Board (“FASB”) on August 18, 2016 is the first in a set of major changes which will substantially affect all nonprofit entities (“nonprofits”) and users of their financial statements.

Summary

Lease Accounting Guidance: For several years, we have been following and relaying information regarding the changing standards for lease accounting. Finally on February 25, 2016, the Financial Accounting Standards Board (FASB) published its long-awaited standard on lease accounting. With this change (ASU No. 2016-02), the FASB intends to increase transparency and comparability among organizations by recognizing the assets and liabilities that arise from mostly all lease transactions. The chief purpose of the change is to provide lenders and other users of financial statements a more accurate picture of the long-term financial obligations of the companies."The new guidance responds to requests from investors and other financial statement users for a more faithful representation of an organization's leasing activities," FASB Chairman Russell Golden said in a statement. "It ends what the U.S. Securities and Exchange Commission and other stakeholders have identified as one of the largest forms of off-balance sheet accounting, while requiring more disclosures related to leasing transactions."

In Sean Spitzer's recent article, "Prepare Now for Revenue Recognition Changes," he provides a clearer picture of the new standard (ASU No. 2014-09, Revenue from Contracts with Customers), describes the new standard's affect on certain industries and recommends next steps for planning. Below, we outline changes for your borrowers that you should be aware of.

Contributed by: Sean Spitzer, Partner

Since 2002, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working on converging U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). There’ve been successes and failures along the way, but now the convergence effort appears to have run its course. Going forward, U.S. standard setters propose an informal, collaborative model that will minimize differences in financial reporting, in lieu of the IASB’s one-size-fits-all approach. Here’s an overview of global accounting standards — past, present and future.

Start planning now for revenue recognition changes

Note: This article, originally published September 2014 has been updated to reflect a FASB notification issued March 2015.

Audit professionals, CFOs and CEOs and other stakeholders of all companies should find long-awaited clarity and guidance in newly issued standards surrounding going concern disclosures in financial statement footnotes. Smith & Howard’s Assurance Services group reports that the Financial Accounting Standards Board (FASB) recently updated U.S. Generally Accepted Accounting Principles (GAAP) to clarify going concern disclosures.

The construction team at Smith & Howard often advises construction clients who have separate, but related, business entities used to buy vehicles, equipment or facilities that they then lease back to their parent company. Earlier in 2014, FASB issued guidance that applies to privately held companies using GAAP providing a way for some construction companies to realize a simpler way to handle the financial reporting of these type of lease/buy-back arrangements.