On August 18, 2016 the Financial Accounting Standards Board issued a significant update to the financial accounting standards applicable to nonprofit organizations (Accounting Standards Update 2016-14).
The new standards are effective for fiscal years beginning after December 15, 2017 but organizations should begin preparing now because once the new standards are in effect, comparison data from previous years will generally have to be restated to conform to the new standards. An organization with a fiscal year beginning January 1 will first report under the new standards for the year January 1, 2018 through December 31, 2018. However, if that report contains comparisons to the previous year, 2017, the previous year numbers will have to be prepared consistent with the new standard. Rather than going back at the end of 2018 and recalculating 2017 numbers, it may be easier to maintain two sets of records during 2017, one under the current standards and one under the new standards which can be used for comparison purposes during 2018.
Only organizations that are subject to audit, whether voluntarily or as required by law, will be directly affected by these changes. Other organizations should consider adopting the new standards in order to allow funders and directors to make direct comparisons with financial data of other organizations.
We recommend that nonprofit organizations speak with their accountants about how to best implement these changes.
The following chart provides a very brief summary of changes in the standards between the current rules and the new rules.
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