How did FASB Statement No. 117 change financial reporting?
SFAS No. 117 (1993, effective 1995 for most organizations) requires that nonprofit, nongovernmental entities report on the aggregate financial position of the entity by showing Assets, Liabilities, and the difference between the two — Net Assets. Net assets are classified into “Unrestricted”, “Temporarily Restricted”, and “Permanently Restricted” classes. This means GAAP (generally accepted accounting principles) for NPOs after 1995 is different than GAAP for NPOs prior to 1993-5 which was dictated by AICPA Audit Guides, Voluntary Health and Welfare Organizations, Colleges and Universities, and Certain Other Nonprofit Organizations. 2. What is Fund Accounting? Under the guidance of the AICPA’s Audit Guides (prior to the 1996 consolidation of three audit guides now called Nonprofit Organizations) fund accounting was required GAAP, similar to governments. In this system, funds for current (unrestricted) activity, and various restricted activity were established, such that each fund was
