FASB added two agenda projects—a standard-setting project and a research project—intended to improve financial reporting of nonprofit organizations. The objectives of these projects encompass suggestions from FASB’s Not-for-Profit Advisory Committee (NAC) at the panel’s September 2011 meeting.
The NAC recommended action in these areas after its September meeting (see previous JofA coverage, “FASB Panel Recommends Areas of Improvement in Standards for Nonprofits”). A summary of the NAC’s recommendations is available at tinyurl.com/4xpztvs.
“The FASB shares the committee’s belief that, while sound, the existing standards for financial statements of not-for-profit organizations can be updated and improved to provide better information to donors, creditors and others,” FASB Chairman Leslie Seidman said in a press release. “FASB members agree it is time to revisit and refresh the not-for-profit financial reporting model, which is nearly two decades old.”
FASB said the standard-setting project will focus on the financial statements and related notes that are unique to nonprofit organizations. It will re-examine existing standards for financial statement presentation by nonprofit organizations with a focus on improving the current net asset classification scheme and information provided in financial statements and notes about an organization’s liquidity, financial performance and cash flows.
FASB said the research project will study other means of communication that nonprofit organizations use to tell their financial story. Specifically, the project will:
1. Review best practices followed by nonprofit organizations in this area and how such communications enhance the understanding of donors, creditors and other stakeholders about the financial health and performance of the organization; and
2. Determine whether FASB, through its leadership or standard-setting efforts, can contribute to promoting such communications.
FASB said in the press release that more information about the agenda projects will be available in the coming weeks at fasb.org.
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