Wiley Not-for-Profit GAAP 2015: Interpretation and Application of Generally Accepted Accounting Principles

Book Preface

Not-for-profit accounting is a specialized field of accounting that is receiving a growing level of attention. Over one million not-for-profit organizations currently operating in the United States have unique accounting and financial reporting issues that must be understood by a growing number of not-for-profit organization financial statement preparers and users.

The Financial Accounting Standards Board (FASB) has issued a series of statements and accounting standards updates that have significantly affected how not-for-profit organizations account for and report their activities and financial position. The overall financial statement format reports “net assets” instead of fund balance or other description of “equity,” and the accounting principles for two key areas for these organizations—contributions and investments—were the topics of separate FASB pronouncements. The American Institute of Certified Public Accountants (AICPA) issued a pronouncement specifying how not-for-profit organizations should account for the joint costs of activities that include fund-raising. The FASB has also issued a statement detailing the accounting for resources which a not-for-profit organization passes through to another organization. The FASB has also finalized the accounting requirements that will apply when two not-for-profit organizations combine, and has also provided guidance for reporting endowments. The FASB has also been active in many areas that affect a broad range of business and other organizations, including not-for-profit organizations. For example, financial instruments, asset impairments, intangible assets, pension obligations, and fair value measurements have all been areas that have been impacted by recent FASB pronouncements. All of these topics are examined in detail in this book.

This book incorporates the codification of accounting standards into the FASB Accounting Standards Codification (the “Codification” or “FASB ASC”). The FASB essentially eliminated the statements on standards and other accounting literature and replaced them with the FASB ASC, which is updated as the means of promulgating changes in generally accepted accounting principles.

Despite the steady stream of accounting pronouncements that affect not-for-profit organizations, it’s important to understand that accounting standards setting over the past decade has been influenced by a great deal of recent change. The Sarbanes–Oxley Act of 2002 created the Public Company Accounting Oversight Board (PCAOB) which has responsibility for setting auditing and other standards for public companies. Even with all of the new requirements and changes, the FASB continues to set generally accepted accounting principles for both public and nonpublic entities, including not-for-profit organizations. However, the FASB’s agenda has focused more on issues affecting public companies, which has likely been influenced by the changes in the regulatory environment and issues highlighted by the numerous accounting shortcomings, and more recently by the turmoil being experienced in the financial markets. This is likely to change a bit as the FASB has established a Not-for-Profit Advisory Committee which has begun a reexamination of the reporting model used by not-for-profit organizations and has made suggestions to the FASB to improve the financial reporting of these organizations. The near future will likely see FASB action to address some of the recommendations of its Advisory Committee. In addition, the AICPA, through technical practice aids, industry risk alerts, and accounting and auditing guides, continues to be an important contributor to the body of accounting principles used by not-for-profit organizations. It has also finalized a significant revision of its accounting and audit guide for not-for-profit organizations.

This book is designed as a complete and easy-to-use reference guide for financial statement preparers and users, as well as for auditors of not-for-profit organizations. It focuses on three key areas:

• Distinguishing characteristics of not-for-profit organizations and their financial accounting and reporting;
• Accounting areas that are unique to not-for-profit organizations;
• General areas of accounting that are applicable to the accounting and financial reporting of not-for-profit organizations.

This book would not have been possible without the hard work and efforts of several individuals. John DeRemigis and Pam Reh contributed greatly to the production efforts over many years. The authors are greatly appreciative of their efforts.

Richard F. Larkin, CPA
Marie DiTommaso
July 2014