A New Face for Your Financials: Start Preparing Now
The new accounting guidance on nonprofit financial reporting applies to fiscal years beginning after Dec. 15, 2017 (calendar 2018 for calendar-year organizations); however, early adoption is permitted. So now would be a good time to think through the impact the new accounting standards will have on your financial statements.
Practically speaking, your executive director, CFO and board members will all need to understand how these changes translate into the numbers they will be seeing.
With this in mind, consider these three steps for getting everyone up to speed:
- Review — Download a copy of the new accounting standard at http://www.fasb.org. Included are illustrative examples and sample financial statements your financial and accounting team can use to more clearly understand the potential impact on your organization. You might also consider sitting down with your CPA for a high-level overview, or to at least get the answers to your most pressing questions.
- Brief and train — As the implementation date draws nearer, share with the users of your financial statements what they can expect. A brief e-mail from your executive director with a link to a briefing document can help set the stage. Then, schedule time at a regular board meeting for your CFO to provide an update and take questions.
Note that certain financial statement users may require more formal training on the new reporting structure. Consider asking your CPA to arrange for a webinar or PowerPoint presentation. Your audit committee—and possibly the full board—should also be briefed by your outside auditors on how the changes will impact the audit process.
- Conduct a run-through — Prepare pro forma financial statements following the new rules to see how they will affect your organization’s financial reporting. You can create a mockup of your most recently issued GAAP financial statements using the new requirements and then present it to management and the board for their feedback.
If it would be beneficial, you might even consider early adoption. Here, it’s important to note that additional new FASB standards—for revenue recognition and leasing—will also be taking effect in the next few years, creating what some have called a “trifecta of standards.” You will be allowed to early adopt two of the three new standards.
If you have questions about how these new accounting standards may impact your organization, please contact a member of our nonprofit team at 512.610.7200.