FASB Addresses General Expenditure Questions for Nonprofit Standard
With the 2018 effective date approaching for Accounting Standards Update (“ASU”) No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, a project manager with the Financial Accounting Standards Board’s (“FASB”) research team has advised nonprofit groups not to overthink the concept of “general expenditure.” Addressing concerns over the disclosure of funds for general expenditure at last week’s FASB Not-for-Profit Advisory Committee meeting, Rick Cole said donor restrictions on certain funds would not be exempt from general expenditures. He remarked that many of the illustrations should be taken as they are, not as absolute law.
FASB Assistant Director Jeffrey Mechanick also chimed in, saying the new guidance requires colleges and nonprofits to disclose how they evaluate the availability of financial assets for general expenditure. Mechanick suggested that nonprofits are fine as long as they are transparent and consistent about general expenditures, and how it fits within their budget and funds.
The forthcoming standard is the first change to nonprofit accounting since 1993. ASU No. 2016-14 is meant to help nonprofits disclose information such as their expenses, financial performance and cash flows, and it requires updates to how their net assets are classified.
If you’re in need of assistance with implementing the new standard, reach out to one of Cherry Bekaert’s knowledgeable nonprofit professionals.