The new ASU, 2016-14 Not-for-Profit Entities (Topic 958) Presentation of Financial Statements of Not-for-Profit Entities, will require financials statements of nonprofits to disclose expenses by both functional and natural classifications. In English, this means a Statement or Schedule of Functional Expenses will be required for all, when previously only voluntary health and welfare nonprofits were required to disclose such information. This disclosure will be necessary to report either in the financial statements themselves, or in the notes.
Most assume that this information is readily available to the organization, but when the pedal hits the metal and the report needs to be put together, and further be analyzed by higher ups and board or trustee members, it may not always be the case that it’s the result of merely pushing a button. It could be that easy, though, if your chart of accounts were set up properly to capture information. Not all charts of accounts are set up, or used properly, to do this. The good news is there is time to evaluate your systems and see if they are up to the task. Some small changes may be needed, or an entire overhaul. Now is a good time to find out. Also a tune up of how to use the coding system pairs with a properly functioning system that results in good reporting. So some timely training for the staff that input data, and those who review output, may also be appropriate.
The effective date of the new ASU 2016-14 is for fiscal years beginning after 12/15/2017 (so for calendar year 2018). This is the time to make decisions about changing the underpinning of the accounting system, better known as the chart of accounts.