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FASB Issues Recommendations for Nonprofit Accounting Standards

FASB is considering changes to how nonprofits file accounting reports.

Earlier this year, the Journal of Accountancy reported that the Not-for-Profit Advisory Committee (NAC), a branch of the Financial Accounting Standards Board, was working to find ways in which nonprofits' financial reporting standards could be improved, and had set up three groups to do so.

The working groups were assigned to research reporting financial performance - how agencies share their activities, cash flows and other performance metrics - and liquidity/financial health - how balance sheets and notes could convey liquidity and financial health more clearly. The third group was charged with finding better means of "telling the story" - or ways that nonprofits can report on financial measures besides simply stating their activities and cash levels, according to the Journal.

Those working groups recently gave the FASB their recommendations for how to change nonprofits' reporting standards. The news source reports that one of NAC's proposals was to change financial statement formats for nonprofits. In order to achieve greater cohesion between all the statements organizations must file, the committee said there was a "desire for a better disaggregation of operating versus non-operating aspects of financial performance" in activity and cash flow statements.

Additionally, NAC suggested changing net asset classes to be more clear - providing more relevant information to calculate a nonprofit's liquidity - and including Management Discussion and Analysis (MD&A) on reports.