Accounting Standards Update No. 2016-14 is the first major update to nonprofit accounting in almost 25 years. Becoming familiar with the changes as soon as possible can smooth the transition for organizations.

In implementing the new standard, nonprofits will have to make some important decisions, including:

•    How to disclose information regarding the function and nature of expenses: on the face of the statement of activities or in the notes?
•    Which method — indirect or direct — will be used to present the amount of operating cash flows? (The indirect method reconciliation will no longer be required if using the direct method.)

The standard takes effect for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted.