FASB ASC 958

Definition

FASB ASC 958 is the Financial Accounting Standards Board Accounting Standards Codification section that specifically provides guidelines for financial reporting by not-for-profit organizations. It addresses unique aspects of nonprofit accounting, such as contributions, net asset classification, and the presentation of financial statements, ensuring transparency and consistency in reporting financial activities within the sector.

5 Must Know Facts For Your Next Test

1. FASB ASC 958 was established to provide a consistent framework for the accounting practices of not-for-profit organizations, ensuring they adhere to standards that reflect their unique financial activities.
2. Under FASB ASC 958, nonprofits must classify their net assets into three categories: unrestricted, temporarily restricted, and permanently restricted, which reflects the donor's intent regarding the use of funds.
3. The guidance emphasizes the importance of recognizing contribution revenue when a nonprofit receives a pledge or a donation, outlining how to report these funds based on their restrictions.
4. FASB ASC 958 also requires nonprofits to present a statement of cash flows, which helps stakeholders understand the organization's liquidity and financial health over time.
5. Organizations must disclose information about their significant accounting policies and any risks associated with financial reporting under FASB ASC 958 to maintain transparency with stakeholders.

Review Questions

• How does FASB ASC 958 influence the way not-for-profit organizations report their financial activities?
  • FASB ASC 958 influences not-for-profit organizations by establishing standardized accounting practices that ensure consistency and transparency in financial reporting. It outlines how nonprofits should classify net assets into unrestricted, temporarily restricted, and permanently restricted categories based on donor intent. This classification is crucial as it affects how organizations manage and report their finances, helping them communicate their financial position effectively to stakeholders.
• What are the implications of classifying net assets under FASB ASC 958 for donor relations and financial management in nonprofits?
  • Classifying net assets under FASB ASC 958 has significant implications for donor relations and financial management in nonprofits. By clearly categorizing funds based on donor restrictions, organizations can foster trust and accountability with their supporters. Additionally, effective management of these classifications allows nonprofits to allocate resources efficiently, ensuring they meet both donor expectations and organizational goals. This transparency can enhance donor confidence and potentially increase future contributions.
• Evaluate how the implementation of FASB ASC 958 might affect stakeholder perception of a nonprofit's financial health and governance practices.
  • The implementation of FASB ASC 958 can positively affect stakeholder perception of a nonprofit's financial health and governance practices by promoting enhanced transparency and accountability in reporting. Stakeholders, including donors, board members, and regulatory agencies, can gain clearer insights into how funds are managed and allocated due to standardized reporting guidelines. This clarity can lead to greater confidence in the organization’s fiscal responsibility and governance practices, which may result in increased support and trust among stakeholders.

Related terms

Not-for-Profit Organization: A legal entity organized for a purpose other than generating profit, often focused on social, educational, charitable, or community goals.

Net Assets: The difference between an organization's total assets and total liabilities, representing the residual interest in the organization's assets after deducting liabilities.

Contribution Revenue: Funds received by a nonprofit organization from donations or grants that are intended to support its mission and programs.