For our clients and friends who attended our Lunch & Learn on October 26th at The Hope Center – thanks for the active conversations and questions that came from our Accounting Standards Update for Nonprofit Organizations discussion. Probably the hottest topic affecting nonprofits is the requirement to present expenses based on function and natural classification. This requires organizations to provide expenses by natural classification on the face of the statement of activities and a related footnote disclosure grouping the expenses between program and supporting services, or provide a statement of functional expenses or provide natural expenses in a footnote disclosure. This change will affect a number of nonprofit organizations – beginning 1/1/18.
Another hot topic revolved around the new footnote disclosure for cash reserves for operating expenses. The nonprofit is required to provide qualitative and quantitative information relative to financial assets and whether there are contingent reserves that can been accessed to fund operating expenses. If your financial assets include restrictions those amounts must be excluded to determine liquid reserves for operating activity.