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NPO Reporting – FASB Update

On September 4, the Financial Accounting Standards Board tentatively voted to propose that not-for-profit entities narrow the existing terminology regarding net assets from three classes to two.  Currently, not-for-profits present totals for each of the three classes of net assets (unrestricted, temporarily restricted and permanently restricted) on the face of the statement of financial position, with the changes in each of those classes being presented on the face of the statement of activities. The proposed change would require totals for two classes of net assets, those with donor-imposed restrictions and those without donor-imposed restrictions, to be presented on the face of the statements.


In order to counter the potential loss of information from combining temporarily and permanently restricted net assets into one category, a note in the financial statements with respect to the composition of the net assets at the end of the year would be required.

While in the early stages of discussion, this proposal represents a removal of the hard-line distinction between temporary and permanent restrictions toward a description of the differences in the nature of the resources and both how and when they can be utilized.

Timothy Schroeder is a Not-for-Profit Services Group Manager with expertise in audits of financial statements and employee benefit plans, including the preparation of Form 990.

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