Article written by:
Alexandra Meyers

As 2018 continues, we are fully embracing our purpose statement: at GBQ, we empower growth; growth of our people, our communities and our clients’ businesses. GBQ’s extensive involvement with various nonprofit entities (NFP) allows us to empower the growth of our community.

Though NFPs differ in mission and what they strive to achieve, they all have one thing in common—the nature in which their businesses operate. NFPs have to follow their own unique financial reporting standards since the purpose of the business is not to make a profit. According to ASU No. 2016-14, net asset reporting for NFP businesses will be classified in a different form. Previously, net assets were classified as unrestricted, temporarily restricted and permanently restricted. Effective in 2018, net assets will simply be either unrestricted or classified as net assets with donor restrictions. This will affect all NFPs in the current year as it strives to reduce the complexity of financial presentation. It will improve the usefulness of information available to donors, grantors, or creditors and reduce costs related to complexity. Overall it’s believed to enhance financial statement disclosure making the information more useful and hopefully providing relevant information to better allocate an NFP’s resources.

NFPs will be required to apply this standard in the current year. With the implementation of this standard, assets will be classified differently on financial statements and this will help to improve the decisions made regarding funding distribution, presentation and liquidity.

Nonprofit entities can expect a second phase of this pronouncement that addresses financial performance to be released in the future. Should you have any questions regarding the new standard and how we can help in empower your growth, please contact your GBQ advisor.

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