For WizardKim-DPR1

Week 8 Discussion Post 1st Response:

Instructions: Respond to the post below from your fellow classmate. Any opinions, or anything you would like to add to discuss about their post. Must be three substantial paragraphs, and three references.

The FASB has a commitment to the not-for-profit sector as part of the FASB standards definition process for accepted principles (GAAP), over the years it has been fulfilled as a need for the sector's accounting and reporting, both for transactions that are exclusive to the sector as well as to what it has in common with public and private companies, today within the FASB it has an area that supplies the non-profit sector and in 2009 a non-profit advisory committee (NAC) was approved. In addition, the NAC FASB is supported by a Permanent Non-Profit Funding Group, with the creation of this sector the FASB aims to reduce some of the complexities of US GAAP non-profit reporting and, at the same time, make it easier for users of financial accounts to an organization's financial position and related activities (FASB 2020).

The existence of certain inconsistencies in the accounting and information disclosure practices adopted by non-profit institutions in the USA led the Financial Accounting Standards Board (FASB) to carry out a project, whose objective was to standardize certain basic information to be accepted by different users ( FASB 2016). ASU 2016-14 emphasizes improvements in liquidity and statement of financial position aim to improve the presentation of information communicated in non-profit financial accounts, in particular liquid assets, liquidity, financial performance and cash flows, the norm that was proposed and aims to improve the way in which non-profit associations demonstrate their performance and financial conditions and at the same time it reduces costs and complexities in the preparation of accounting accounts.

Some of the changes to ASU 2016-14 (Christopher Gordon 2018):

· Previously had three asset classifications (Unrestricted, temporarily restricted and permanently restricted) ASU 2016-14 combines temporarily restricted and permanently restricted liquid assets into "donor-restricted liquid assets" and renames unrestricted liquid assets to "unrestricted liquid assets" . "

· Another change is the disclosure of qualitative information on how to manage the net resources available to meet the cash needs for general expenses within one year from the date of the statement of financial position.

· Analysis of expenses by their natural classification (such as wages, rent and depreciation), as well as their functional classification (program, management and general and fundraising) in one location. This can be done on the face of the activity statement, in a separate statement or in the notes to the financial statements

· Within the limits of prudence under the multi-state versions of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), not-for-profit organizations can spend on grant funds, even if the funds are below the original grant or historical amount.

· They are required to disclose the net assets designated by the board in the body of the financial statements or in the notes to the financial statements.

· ASU 2016-14 eliminates the need to provide a reconciliation from the direct method to the indirect method when presenting the statement of cash flows using the direct method.

Not-for-profit organizations use 4 main financial reporting statements: balance sheet, income statement, cash flow statement and statement of functional expenses. It is very important to guarantee the veracity of the information and make the accounting records correctly and maintain the transparency of the information.

References:

Gordon, Christopher (2018, December 5)Simplifying implementation of FASB’s not-for-profit financial reporting standard.https://www.journalofaccountancy.com/news/2018/dec/fasb-not-for-profit-financial-reporting-standard-201819721.html

FASB (2020).NOT-FOR-PROFIT FINANCIAL REPORTING.  https://www.fasb.org/jsp/FASB/Page/ImageBridgePage&cid=1176168380111

FASB (2016). Not-for-Profit Entities (Topic 958).https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168381847&acceptedDisclaimer=true