This document provides an overview and agenda for an upcoming course on the new accounting standards under FASB ASU 2016-14 for nonprofit financial statement presentation. The course will cover key changes such as consolidating net asset classes, requiring analysis of expenses by both nature and function, enhanced liquidity and investment return disclosures, and transition guidance. It outlines the objectives of the new standards to improve usefulness of nonprofit financial statements and compares current requirements to the new guidance. The document concludes with contact information for the course presenters.

1. A New Look for
Nonprofits
Eric Glantz and Caroline Judy
May 31, 2018
Raffa Learning Community
Thrive. Grow. Achieve.

2. Presentation Title / Page 1
COURSE UPDATE DATE: __MAY 29, 2018___________
COURSE REVIEWED BY: __ERIC GLANTZ__________
COURSE REVIEW DATE: __ MAY 30, 2018 __________
NASBA FIELD OF STUDY: __ACCOUNTING__________

3. COURSE AGENDA
• Effective Date
• Net Asset Classes
• Investment Return
• Classification of Expenses
• Statement of Cash Flows
• Liquidity Disclosures
• Operating Measure Disclosures
• Transition Guidance
• Q&A
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4. LEARNING OBJECTIVE
Financial Accounting Standards Board (FASB)
Accounting Standards Update (ASU) No. 2016-14,
Not-for-Profit Entities (Topic 958): Presentation of
Financial Statements of Not-for-Profit Entities.
• It has been more than two decades since the FASB
has significantly overhauled the financial statement
presentation of non profit organizations.
• Most of the changes do not significantly impact the
fundamental accounting utilized by nonprofits;
rather most changes impact how nonprofit financial
statements are being presented to the financial
statement user
• Course will discuss the timeline and significant
changes necessary for compliance (by financial
statement component)
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5. ASU 2016-14 NFP ENTITIES (TOPIC958):
PRESENTATION OF FINANCIAL STATEMENTS
OF NFP’S
• Applies to NFPs including nongovernmental
entities such as charities, foundations, college
and universities, health chare providers, cultural
institutions, religious organizations, trade
associations and other NFPs
• FISCAL YEARS BEGINNING AFTER DECEMBER
15, 2017
• For most NFPs the new guidance will be effective for
FS’s with fiscal years ending December 31, 2018
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6. NET ASSET CLASSES
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7. NET ASSET CLASSES
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Currently Net Assets are required to be
categorized into three classes:
• Available for current operations
• Board-designated
Unrestricted
Net Assets
• With donor restrictions that
expire once a purpose is
accomplished or with the
passage of time
Temporarily
Restricted
• Donor restrictions that do not
expire
• Funds to be held in perpetuity,
i.e. an endowment fund
Permanently
Restricted

8. NET ASSET CLASSES
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New Guidance re-titles and collapses Net Asset
classes as follows:
• Unrestricted Net
Assets
Without Donor
Restriction
• Temporarily Restricted
Net Assets
• Permanently
Restricted Net Assets
With Donor
Restriction

9. NET ASSET CLASSES
• Without Donor Restrictions
– Undesignated
– Board-designated
• Must disclose amount, purpose and type of board
designation
• With Donor Restrictions
– Disclose nature, amount and timing of restrictions at
the end of the period and how the restrictions affect
the use of resources
• Endowment footnote disclosures remain with the
underwater portion of endowment funds that are
currently classified as unrestricted now being
classified as with donor restrictions
• Donor restrictions on donated long-lived assets will
now be required to be released when the asset is
placed in service
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10. NET ASSET CLASSES
Net Asset footnote disclosures are being
enhanced to include additional information:
– Amounts and purposes of governing board
designations, appropriations, and similar actions
that result in self-imposed limits on the use of
resources without donor-imposed restrictions as
of the end of the period
– Composition of net assets with donor restrictions
at the end of the period and how the restrictions
affect the use of resources
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11. NET ASSET CLASSES
Net Asset footnote disclosures are being
enhanced to include additional information:
– Underwater net assets:
• Nonprofits policy, and any actions taken during the
period, concerning appropriations from underwater
endowment funds
• The aggregate fair value of such funds
• The aggregate of the original gift amount (or level
required) to be maintained
• The aggregate amount by which funds are underwater,
which are to be classified as part of the net assets with
donor restrictions
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12. NET ASSET CLASSES
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13. NET ASSET CLASSES
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14. REVIEW QUESTION
A contribution to establish an endowment will be
shown on the Statement of Activities under
which labeled column?
A. Endowments
B. With Donor Restriction
C. Permanently Restricted Net Assets
D. Without Donor Restriction
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15. REVIEW QUESTION
A contribution to establish an endowment will be
shown on the Statement of Activities under
which labeled column?
A. Endowments
B. With Donor Restriction
C. Permanently Restricted Net Assets
D. Without Donor Restriction
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16. INVESTMENT RETURN
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17. INVESTMENT RETURN
• Currently investment income and expenses
are either reported separately or net of one
another in the financial statements
• New Guidance:
– A net presentation of investment expenses against
investment return is required on the face of the
statement of activities
– External and direct internal investment expense
will be netted against the investment return
– Disclosure of netted investment expenses is no
longer required in the financial statement notes
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18. INVESTMENT RETURN
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19. CLASSIFICATION OF EXPENSES
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20. CLASSIFICATION OF EXPENSES
• All nonprofits will now be required to
present an analysis of expenses by both
nature and function in one location in the
financial statements, either as:
– A separate statement
• Already required for health and welfare
organizations
• Used as a supplemental schedule by many
nonprofits
• May be the most effective presentation option for
nonprofits with more than one program
– On the face of the statement of activities
– Disclosure in the notes to the financial
statements
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21. CLASSIFICATION OF EXPENSES
• Enhanced disclosures for cost allocation
methods and guidance on management
and general activities
– Additional disclosure regarding specific
methodologies used to allocate costs
among program and supporting functions.
– Investment expenses that have been
netted against investment return are not
permitted to be included
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22. CLASSIFICATION OF EXPENSES
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23. REVIEW QUESTION
All nonprofits are now required to present an
analysis of expenses by both nature and
function …
A. on the face of the Statement of Activities
B. as a disclosure in the notes to the Financial
Statements
C. As a separate Statement that is part of the basic
Financial Statements
D. All of the above
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24. REVIEW QUESTION
All nonprofits are now required to present an
analysis of expenses by both nature and
function …
A. on the face of the Statement of Activities
B. as a disclosure in the notes to the Financial
Statements
C. As a separate Statement that is part of the basic
Financial Statements
D. All of the above
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25. STATEMENT OF CASH FLOWS
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26. STATEMENT OF CASH FLOWS
• Preliminary deliberations by the FASB
nonprofit task force resulted in permitting
both the direct and indirect methods to be
presented
– The intent is to allow nonprofits to select the
presentation method that best serves their
needs by providing greater flexibility in
financial reporting
• Eliminates the indirect reconciliation
requirement if the direct method is elected
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27. STATEMENT OF CASH FLOWS
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28. STATEMENT OF CASH FLOWS
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29. LIQUIDITY DISCLOSURES
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30. LIQUIDITY DISCLOSURES
• Requires nonprofits to disclose their
policy for managing liquid financial
assets to satisfy short term cash
requirements.
• Qualitative information about how the
entity manages its liquidity, financial
flexibility, and allocation of resources.
– The types of resources used and how they
are allocated in carrying out the nonprofits
activities
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31. LIQUIDITY DISCLOSURES
• Quantitative information that
communicates how the nonprofit
manages its liquid resources available to
meet cash needs for general expenditure
within one year.
– Availability could be affected by:
• The asset's nature
• External limits imposed by donors or others
• Internal actions of the governing board
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32. LIQUIDITY DISCLOSURES
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33. LIQUIDITY DISCLOSURES
32
NFP’s financial assets available within one year of the balance
sheet date for general expenditures are as follows:
Cash and cash equivalents $ 4,575
Accounts and interest receivable 2,130
Contributions receivable 1,825
Short-term Investments 1,400
Other investments appropriated for current use 10,804
Total $20,734
NFP’s endowment funds consist of donor restricted and a quasi
endowment. Income from donor-restricted endowments is
restricted for specific purposes and, therefore, is not available
for general expenditure. As described in Note X, the Quasi-
endowment has a spending rate of 5 percent, $1.65 million of
appropriations from the quasi-endowment will be available within
the next 12 months.

34. LIQUIDITY DISCLOSURES
33
As part of NFP’s liquidity management, it has a policy to structure
its financial assets to be available as its general expenditures,
liabilities, and other obligations come due. In addition, NFP
invests cash in excess of daily requirements in short-term
investments. To help manage unanticipated liquidity needs,
NFP has committed lines of credit in the amount of $20 million,
which it could draw upon. Additionally NFP has a quasi-
endowment of $33 million. Although NFP does not intend to
spend from its quasi-endowment other than amounts
appropriated for general expenditure as part of its annual
budget approval and appropriation process, amounts from its
quasi-endowment could be made available if necessary.
However, both the quasi-endowment and donor–restricted
endowments contain investments with lock-up provisions that would
reduce the total investments that could be made available (see
Note Y for disclosures about investments).

35. LIQUIDITY EXERCISE
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NFP TRAINING EXERCISE.XLSX
1. STATEMENT OF FINANCIAL POSITION
2. ADDITIONAL INFORMATION
3. SOLUTION

36. OPERATING MEASURE DISCLOSURE
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37. OPERATING MEASURE DISCLOSURE
• Many nonprofits chose to make a
distinction between operating and non-
operating activities on the statement of
activities resulting in inconsistencies in
how nonprofits define a measure of
operations
• Presenting an intermediate measure of
operations is still allowable although
disclosures will be enhanced to provide
additional information about the items
included or excluded from the operating
measure
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38. OPERATING MEASURE DISCLOSURE
• Phase 2 of the FASB’s project is
scheduled to address the following
additional issues:
–Whether to require intermediate
measure(s)
–Whether and how to define such
measure(s) and what items should be
included
–Alignment of measures of operations
in the statement of activities with
measures of operations in the
statement of cash flows
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39. OPERATING MEASURE DISCLOSURE
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40. OPERATING MEASURE DISCLOSURE
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41. OPERATING MEASURE DISCLOSURE
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Measure of Operations
NFP’s operating revenues in excess of expenses and
transfers include all operating revenues and expenses that are
an integral part of its programs and supporting activities, net
assets released from donor restrictions to support operating
expenditures, and transfers from Board-designated and other
nonoperating funds to support current operating activities. The
measure of Operations includes support for Operating activities
from both donor restricted net assets and net assets without
donor restrictions designated for longer-term investment (the
donor-restricted and quasi-endowment) according to NFP’s
spending policy, which is detailed in Note X. The measure of
operations excludes investment return in excess of (less than)
amounts made available for current support, gains and losses on
extinguishment of debt, and changes in fair value of the interest
rate swap. Included in the line items net transfer of funds to
operations and net transfer of funds from operations is investment
return appropriated from quasi-endowment to operations of
$1,025, contributions designated by the Board of Trustees for
capital projects from operations of $3,000, and contributions and
bequests designated by the Board of Trustees for quasi-
endowment from operations of $5,000

42. TRANSITION GUIDANCE
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43. TRANSITION GUIDANCE
• ASU 2016-14 NFP entities (topic958): Applies to NFPs
including nongovernmental entities such as charities,
foundations, college and universities, health chare
providers, cultural institutions, religious organizations,
trade associations and other NFPs
– Should be applied on a retrospective basis:
• Apply ALL provisions in year of adoption
• Comparative years – Apply all provisions but may elect
not to include:
– Disclosures regarding liquidity
– Expenses by nature and function
• Disclose the nature of any reclassifications or
restatements and their effects, if any, on changes in
net assets for each period presented
• Early adoption is permitted but must apply regular
transition provisions
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44. QUESTIONS & ANSWERS
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45. This information may not be reproduced without written permission from
Raffa, P.C., 1899 L Street, NW, Suite 850, Washington, DC 20036 (202) 822-5000
For information for and
about nonprofits visit
www.iknow.org
To become or find a nonprofit board
member visit
www.boardnetusa.org
CONTACT INFORMATION
Visit our Web Site at www.raffa.com
Eric Glantz, Audit Partner
Direct: 202-955-5412
e-mail: EGlantz@raffa.com
Caroline Judy, Audit Manager
Direct: 202-955-6717
e-mail: CJudy@raffa.com
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THANK YOU!