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NONPROFITDO YOUR FINANCIAL

STATEMENTS MEASURE UP?

By Rob Schlener, CPA - Partner, Assurance & Advisory Practice

ACCOUNTING

HOT TOPICS

8/4/2019 Aug 2011: Do Your Financial Statements Measure Up?

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 DO YOUR FINANCIAL STATEMENTS MEASURE UP?

Robert Schlener, Assurance & Advisory Partner 

By now, most of you have heard that there are big changes on the horizon when it comes to

accounting standards for US companies. A "convergence" of US standards (Generally Accepted

Accounting Principles, or "GAAP") and International Accounting Standards (IAS) is in the works.

The need for one set of standards is evident with the number of businesses actually doing business

worldwide. Having one platform for all companies to report on has become a necessary by-product

of the globalization revolution that is taking place on Main Street, USA.

With this new set of convergent standards will come marked changes to the format of financial

statements. At the heart of changes is the desire to portray a cohesive financial picture of an entity's

activities and to disaggregate information so it can be used to predict cashflows.

The basic set of financial statements will include the following: Statement of Financial Position,

Statement of Comprehensive Income, Statement of Cashflows, Statement of Changes in Equity, and

footnotes.

The financial reporting standards for Nonprofit organizations already embrace some of these

concepts that will become the standard in the for-profit world in the next few years. Nonprofit GAAP

does not require any particular financial statement format. For example, the statement of activities

can be presented any number of ways, as long as revenues, expenses, gains, losses, and

reclassifications are properly classified by net asset class, and the change in net assets is presented

both by net asset class and in total (ASC 958-225-45-1 and 45-3, formerly SFAS 117, paras. 18-19).

Utilizing the reporting concept of "Intermediate Measure of Operations", the Nonprofit can report

operations in two separate statements (the "statement of unrestricted revenues, expenses and

other changes to unrestricted net assets", and a "statement of changes in net assets"), with an

intermediate measure of operations before arriving at the change in unrestricted net assets. This

reporting style could provide the users of the financials a better indication of the organization's

effectiveness in carrying out its mission. We find it critically important to ensure that the readers of 

financial statements get full benefit from the information being presented. We like to discuss the

reporting options with our clients, prior to the start of the audit engagement.

Though the merging of US and International GAAP will bypass the Nonprofit community, reporting

elements of what is to come for Private and Public companies is already in practice for Nonprofit

organizations. Review your most recent audit report or the report of your client and ask yourself,"Could this organization benefit from a change in format?" If the answer is yes, or you would like to

discuss the topic further, I can be reached at: rschlener@singerlewak.com.

Rob Schlener - Orange County

RSchlener@singerlewak.com  Lewis Sharpstone - Los Angeles

LSharpstone@singerlewak.com Jeff Holt - Los Angeles

JHolt@singerlewak.com  Stephen P. Carter - Silicon Valley

SCarter@singerlewak.com