Nonprofits' Expenses Must Be Reported By Function And Nature In Future

All nonprofit entities will soon be required to report all expenses—other than netted investment expenses—by both function and nature, together with an analysis of them, according to discussion at the March 23 of the Financial Accounting Standards Board.
 
The forthcoming rules for nonprofits' financial statements will require them to show all expenses by function and nature in one location, which means all functional expense categories would be broken down by nature of expense type.  The Board also decided on March 23 that all nonprofits should have flexibility in how they present the analysis of expenses. The analysis can be provided either on the face, in the notes or as a separate statement, FASB said.
 
The decisions are a change to a portion of FASB's April 2015 exposure draft, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities.  Under the original April 2015 proposal, FASB would have required all operating expenses to be presented by function and nature, but its March 23 decision means all expenses are to be presented that way.  This method of presenting all expenses is currently only required in a statement format for voluntary health and welfare associations.