Aug 2011: Do Your Financial Statements Measure Up? | Financial Statement | Generally Accepted Accounting Principles (United States)

DO YOUR FINANCIAL STATEMENTS MEASURE UP?

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

NONPROFIT

ACCOUNTING HOT TOPICS

  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 Jeff Holt - Los Angeles JHolt@singerlewak.com Lewis Sharpstone - Los Angeles LSharpstone@singerlewak.com Stephen P. Carter - Silicon Valley SCarter@singerlewak.com

 

 

 

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