Nonprofits need to maintain an awareness of what’s new, what’s effective now, and what’s on the horizon to ensure their accounting and financial statements continue to comply with GAAP.
The below summaries discuss each of the 2021 ASUs and the ASUs that are effective for years ending December 31, 2021.
Generally, FASB sets effective dates by segregating public business entities (PBE) from all other entities. Occasionally, FASB will additionally segregate smaller reporting companies (SRCs), not-for-profit entities (NFPs) that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or employee benefit plans that file or furnish financial statements with or to the SEC. The effective dates included below are the dates applicable to both PBE and non-PBE entities.
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What’s New for Nonprofit Organizations in 2021?
| 2021-03—Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events | |
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| Summary: FASB received feedback from stakeholders that the cost and complexity of monitoring and evaluating triggering events throughout the reporting period outweighed the benefits to the financial statement users. The stakeholders noted these challenges were exacerbated by the COVID-19 pandemic, but the challenges were not exclusively related to COVID-19. This ASU provides relief to private companies and not-for-profit entities within the scope of the update by establishing a new private company accounting alternative for goodwill impairment triggering event evaluation. Under the new accounting alternative, entities can perform an evaluation of goodwill impairment triggering events as of the end of the reporting period, rather than monitoring for goodwill triggering events throughout the reporting period. If an entity elects to use the new accounting alternative, they should apply it on a prospective basis for fiscal years beginning after December 15, 2019, but they should not retroactively adopt the amendments in this update for interim financial statements already issued in the year of adoption. | |
| Effective Date for PBEs | N/A – Not available to PBEs |
| Effective Date for All Others | Fiscal years beginning after December 15, 2019 |
| Early Adoption | Permitted for interim and annual financial statements that have not yet been issued or made available for issuance as of March 30, 2021. |
What's Effective for Nonprofit December 31, 2021, Financial Statements?
The following ASUs are effective for December 31, 2021, financial statements.
| 2020-10—Codification Improvements | |
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| Summary: This ASU makes technical corrections to the codification. Technical corrections include items such as “conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements”. One section of the ASU updates the Disclosure Sections of certain Topics where it was noted that the disclosure requirements or options to present information on the face of the financial statements or in the financial statement footnotes were not previously included in the Disclosures Sections. These changes are not expected to result to changes in current GAAP. The ASU also makes other codification improvements including:
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| Effective Date for PBEs and Conduit Debt NFPs | Fiscal years beginning after December 15, 2020 (interim periods within those fiscal years) |
| Effective Date for All Others | Fiscal years beginning after December 15, 2021 (interim periods within fiscal years beginning after December 15, 2022) |
| Early Adoption | Permitted |
| 2019-04—Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments | |
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| Summary: This ASU clarifies certain accounting aspects related to credit losses (ASU 2016-13), hedging activities (ASU 2017-12), and financial instruments (ASU 2016-01). ASUs 2016-13 for credit losses and 2017-12 for hedging activities are discussed below. The significant updates related to financial instruments (ASU 2016-01) clarify (1) that non-public business entities are exempt from fair value disclosure requirements for financial instruments not measured at fair value on the balance sheet (i.e. held-to-maturity debt securities measured on an amortized cost basis), (2) the measurement alternative for equity securities without readily determinable fair values is a nonrecurring measurement and requires the applicable disclosures, (3) that equity securities without readily determinable fair values are subject to the measurement alternative at historical exchange rates and the rate used should be the acquisition date unless there is a more recent fair value measurement date. | |
| Effective Date for All Entities | The updates related to financial instruments are effective for fiscal years beginning after December 15, 2019. The updates related to credit losses and hedging activities are closely related to the adoption dates for those ASUs. |
| 2018-18—Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 | |
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| Summary: This ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard and provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. | |
| Effective date for PBE | Fiscal years beginning after December 15, 2019 |
| Effective date for all others | Fiscal years beginning after December 15, 2020 |
| Early adoption | Permitted |
| 2018-15—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) | |
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| Summary: This ASU provides guidance for the accounting of implementation costs related to a hosting arrangement that is a service contract and aligns the accounting with the accounting for implementation costs incurred to develop or obtain internal use software that is not a service contract. | |
| Effective date for all PBEs | Fiscal years beginning after December 15, 2019 |
| Effective date for All Others | Fiscal years beginning after December 15, 2020 |
| Early adoption | Permitted |
| 2016-02—Leases (Topic 842) (the following are updates related to Leases) 2020-05—Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities; 2019-10—Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates; 2019-01—Leases (Topic 842): Codification Improvements; 2018-20—Leases (Topic 842): Narrow-Scope Improvements for Lessors; 2018-11—Leases (Topic 842): Targeted Improvements; 2018-10—Codification Improvements to Topic 842, Leases; 2018-01—Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 | |
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| Summary: This ASU is a comprehensive change to the accounting for leases. The ASU results in two types of leases: financing and operating. Financing lease accounting will be similar to capital leases under prior guidance. Entities will see a significant change related to operating lease accounting since under prior guidance operating leases were “off-balance sheet.” Under the new guidance, entities will record a right-to-use (ROU) asset on the balance sheet. | |
| Effective Date for PBEs | Fiscal years beginning after December 15, 2018 |
| Effective Date for Conduit Debt NFPs | Fiscal years beginning after December 15, 2019 (if they have not yet issued financial statements, or made available for issuance, reflecting the adoption of Leases) |
| Effective Date for All Others | Fiscal years beginning after December 15, 2021 |
| Early adoption | Permitted |
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