The Financial Accounting Standards Board (FASB) is on the verge of releasing new standards for nonprofit accounting this summer. The central focus for this move surrounds the apparent need for better financial reporting throughout the sector.
It’s important to become familiar with the different phases involved to know how these changes will impact your organization.
A strategic plan of action, which was initiated by FASB’s Nonprofit Advisory Committee, intends to take a leap forward from the conventional not-for-profit model that was developed more than 20 years ago, and quite frankly, has become outdated.
Based on overwhelming feedback from nonprofit organizations to the initial outline proposal of these new standards, there’s just one catch—certain aspects to it are also dependant on similar changes to the for-profit industry.
More than 250 comment letters from not-for-profit organizations were received by FASB, collectively emphasizing the importance of reporting models from the private and nonprofit sectors to stay in sync. Most feel as though this move will help prevent nonprofit organizations from falling further behind.
With this consideration, FASB revised the outline into multiple phases with the first round of changes to be effective for fiscal year financial statements after December 15, 2017.
Here is what you need to know about Phase 1.
As these targeted changes take place to the existing standards for reporting, it will help bring all nonprofit organizations to a level jumping off point for Phase 2, which promises to convey more revolutionary and universal changes to the fundamental financial model.