Lessons Learned from Implementing ASU 2016-14 Functional Expenses
Nonprofit organizations with calendar year ends are working to implement the provisions of Accounting Standards Update (ASU) 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities.
As implementation efforts have been undertaken, we have seen one area that is causing more issues than anticipated. This is the presentation of the statement of functional expenses that shows the analysis of expenses by function and natural classifications. As part of developing this information, entities are looking at their current cost allocation methodology as well as what components, both program and natural expense classifications, that they want to include.
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