The F FASB C Changes ( (ASU 2 2016-14 14): How I Is Y Your No Nonprofit D Doing? 1 Gina McDonald, Lead Consultant, FMA Join the conversation using our April 29, 2020 hashtag, #FASBUpdate
Today’s Pr Presenter Gina M McDonald Lead Consultant, FMA 2
REC RECAP – Timeline f for C Changes ASU 2016-14: Issued in August 2016 First major revision since 1993 Effective Date: Calendar 2018 or Fiscal Year 2019 3
RECAP: P: W What C Changed? Accounting NO Financial Statement Presentation YES Disclosures YES 4
RECAP: P: K Key Pr Provisions Liquidity & Liquidity & Availability Availability Net Asset Net Asset Expenses Expenses Classification Classification ASU 2016-14 Investment Statement of Return Cash Flows 5
Ne Net A Asset Cla Classif ssific ication tion
Net A Asset “C “Classification” Unrestricted Net Net Assets Without Assets Donor Restrictions Temporarily Restricted Net Assets Net Assets With Donor Restrictions Permanently Restricted Net Assets 7
Net A Asset C Classification: In In P Practice GAAP still allows flexibility i in p presentation . It’s okay to disaggregate net assets further and show the following: Without Donor Restrictions With Donor Restrictions • Undesignated • Time Restricted Reserves Purpose Restricted • • • Board Designated • Endowment 8
Net A Asset C Classification: In In P Practice 9
Net A Asset C Classification: In In P Practice 10
Any significant changes in presentation? More details of restricted net assets in footnote disclosures? Was there more or less clarity?
Ex Expe penses
Analysis o of E Expenses b by F Function Current F FASB R Rules nonprofits are required to disclose functional expenses, either: • All n – On the face of the Statement of Activities, – As a schedule in the notes to the financial statements, or – In a separate Statement of Functional Expenses • Disclosure o of t f the m methods u used t to a allocate e expenses to the functional categories are also required 13
Analysis o of E Expenses b by F Function 14
Functional E Expenses: T TODAY Are you allocating costs among functions throughout the year, or only at year end? Who is creating your Statement of Functional Expenses? Your auditor? Do board members and key staff understand your organization’s allocation methodology? Are you reporting “true cost”? 15
Li Liqui uidity ty & A Availability
Liquidity & & A Availability o of R Resources Availability of financial Disclose how a assets to meet cash nonprofit manages needs for genera ral l its available liquid res within expenditure resources and one year of balance sheet date Qualitative Quantitative 17
Liquidity D Disclosure: Q Quantitative 18
Liquidity D Disclosure: Q Qualitative Note X X – Liquidity a and A Availability o of F Financial A Assets Organization ABC’s working capital and cash flows have seasonal variations . . . To manage liquidity the Organization maintains a line of credit of $100,000 . . . The Organization has $487,757 in financial assets as of the balance sheet date . . . amounts set aside for operating and other reserves could be drawn upon if the Board of Directors approves that action. 19
Liquidity D Disclosure: T TODAY Unlike other information in an audit, the liquidity disclosure is forward focused • Who is calculating and crafting the disclosure? Your auditor? • Does the disclosure clearly articulate your organization’s liquidity “story?” • Do your board members and key leadership staff understand the story this disclosure is telling? 20
Liquidity D Disclosure: T TODAY A tool for managing in the current environment • Liquidity is a business i issue —possibly an existential one—for a significant part of the nonprofit sector tric and use it as an opportunity to • Own th this m metr analyze and understand your liquidity and cash management strategy • Consider calculating it quarterly • Identify and analyze the trends 21
Understand Identify Current Implications Manage Financial and Cash Flow Position Scenarios Net Assets Revenue Financing Operating Liquidity Expenses Cash Flow
Questions? 23
Re Resources Str trongNonprofits ts.o .org In collaboration with the Wallace Foundation, FMA has created a library of tools and resources to help organizations become “fiscally fit” Planning | Mo ing | Op Operations | Go Four T Topic A Areas: : Pl Monit itorin Governance ce 24
Thank y you f for j joining u us! 25 Nonprofit Q Quarterly relies o on y your g generous s support. If . If y you enjoyed t this w webinar, p , please c consider d donating t today! https:/ ://nonprofitquarterly.n .networkforgood.co .com/ Thanks for joining us! Share your thoughts using our hashtag, #FASBUpdate
Re Resources Online T Tutorials f for S Str trongNonprofits ts.o .org FMA offers complimentary orientation one-hour webinars that feature an overview of the website and drill down on several of its key resources Upcoming webinar date: Look for a • May 1 19, 2 , 2020 a at 2 2pm – 3pm ( (ET) refresh in Fall 2017 To register, or see upcoming webinar dates: http://fmaonline.net/events For a 15-minute, on-demand webinar tour of the site: http://fmaonline.net/SNPonDemand 26
• Established in 1999 to serve not-for-profit Gina M McDonald, C , CPA organizations around the country (646) 416-6047 gmcdonald@fmaonline.net • Provides customized financial management, accounting, software, organizational development, and other consulting services • Works directly with organizations or @FMA4Nonprofits through funder-supported management and technical assistance programs /FiscalManagementAssociates FMA exists to build a community of /company/fiscal-management- individuals with the confidence associates-llc and skills to lead organizations that www.f .fmaonline.n .net change the world 27 New Y York ● Chicago ● Oakland ● Provi vidence ● Washington D DC
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