If your church is required to have outside prepared financial statements (i.e.: for a grant or a lending institution), you need to be aware of changes to the statements for fiscal years beginning after December 15, 2017 (see Accounting Standards Update (ASU) 2016-14). The results of these changes may result in additional time and cost needed this year for the completion of the church financials.

In summary, net assets are now required to be classified as either net assets without donor restrictions or net assets with donor restrictions. Also, earnings from investments must be reported net of related expenses. Finally, expenses must be presented by their natural classification (i.e.: supplies, wages, etc.) and functional classification (program, general support and fundraising).

The purpose of these changes is to help nonprofits provide more relevant and transparent information about their resources to creditors and other users of financial statements.

There are also new disclosures required that provide additional information on liquidity, availability of resources, board designations of funds and the method of allocation of expenses by function.

Check your loan documents to see if they require annual financials prepared on a GAAP basis (generally accepted accounting principles). If they do, these new rules will apply to your 2018 financial statements.

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