A distinctive characteristic of nonprofit organizations is their regular receipt of unforced donations for support (Bap.org). The FASB issued two Statements of Financial Accounting Standards to govern nonprofit organizations’ accounting principles.
SFAS 116 makes 4 declarations. Donations must be recorded not only when received in cash, but also when pledged, and must be recorded as income at once, even if they are hampered by unfulfilled donor restrictions (Fleming). Secondly, receivers of conditional donation pledges must reveal the amounts pledged . Lastly, capital profits and losses on investment and other assets must be shown in the ‘unrestricted’ group unless specific contributor limitations allow it to be recorded in one of the two restricted groups (Fleming).
The impact of the SFAS 116 and 117 has been impressive due to 4 reasons. The two standards are trend-setters (Alesa). Secondly, their impact is so widespread that not only the accounting section, but all other sections of the nonprofit organization have been influenced. Thirdly, several previous omissions and irregularities have been rectified (Fleming). Lastly, there has been great improvement in the comprehensibility and comparability of nonprofits’ financial statements, enabling interested players to quickly, safely and expertly judge the track record of any nonprofit (Alesa). The overall impact is so effective that financial analysts are unanimous in their praise of both standards having generated an impact that is unprecedented during the last 2 decades (Fleming).
References
Alesa, Locklear. “What’s the Impact of SFAS 116 & 117 on Non-Profit Organizations?” Allbusiness.com. 1997. Web.
Fleming, Rob. “New Accounting & Reporting Standards for Nonprofits – What You Need to Know.” Eskimo.com. (N.d). 2009. Web.
“Special Issues Relating to Implementation of FASB Statement 116, 117 & 124.” Bap.org. 2007. 2009. Web.