Previously in “Changes to Financial Statements for Not-for-Profit Entities, Are You Ready?”, we provided an overview of the changes for nonprofit financial statements. Now we will take a closer look at the new net asset presentation and disclosures your organization will face, beginning with your December 31, 2018 financial statements.

If you missed our previous article, the new Accounting Standards Update (ASU) aims to enhance nonprofit financial statements and disclosures by providing users more detailed information. This change is effective for years beginning after December 15, 2017 and will be applied retrospectively to your organization’s financial statements.

Now let’s take a look at the changes.

Historically, nonprofit organizations presented three classes of net assets on the statement of financial position:
• Unrestricted
• Temporarily restricted
• Permanently restricted

Unrestricted net assets are available to the organization without any restrictions by a donor; however, the organization may impose their own restrictions, such as board designated net assets.

Temporarily restricted net assets have a temporary donor restriction attached to them. The restriction could be due to a specific purpose or the passage of time.
Permanently restricted net assets have a permanent donor restriction. The restriction could restrict the use of the principal of an endowment and allow the organization to only use the interest generated by the principal.

What’s New?

Under the new ASU, nonprofit organizations present two classes of net assets on the statement of financial position:
• Net assets without donor restrictions
• Net assets with donor restrictions

Net assets with donor restrictions are the combination of temporarily and permanently restricted net assets.

The reporting change does not eliminate the organization’s responsibility to track the different types of donor restrictions in their accounting records. The organization will disclose the dollar amount and restriction, as well as any board designations, in the footnotes.

Below is a comparison of the statement of financial position:

Before the effective date of the ASU:




After the effective date of the ASU:



So, what do these changes mean for you?

Your financial statements should be more straightforward for readers to understand by combining temporarily restricted and permanently restricted net assets into one line item (with additional detail in the footnotes). Your requirements for tracking donor-imposed restrictions remain the same, so your internal accounting procedures related to these transactions should not change. To see an example of footnotes, see below.

With these changes, nonprofit financial statements will look a bit different than they have in the past. Contact the TDT nonprofit professionals with questions you may have about the new reporting standard.


Here is a look at possible net asset footnote disclosure for a not-for-profit organization.
If the organization has board designated net assets included in the “net assets without donor restrictions,” the following is an example of what the footnote could look like for the organization.

Note 2 – Board Designations

The Organization’s board has designated $50,000 from net assets without donor restrictions for the following purposes as of December 31, 2018.



Note 3 – Net Assets with Donor Restrictions

Net assets with donor restrictions are restricted for the following purposes or periods.

Restricted for a specific purpose:



Restricted due to time: