The primary goal of financial statements is to tell the user about the financial health of the organization. It’s common for many users to focus on the bottom line, but there’s much more to financial health than the net surplus for the year, especially for a nonprofit. How are funds being used? Does the current business model seem sustainable? Is cash readily available for each program as well as overhead expenses? These are questions that potential grantors and donors want to know, and they shouldn’t necessarily need to have in-depth knowledge of nonprofit accounting rules in order to get the answers. The Financial Accounting Standards Board has recognized this issue and is working on a solution. This article gives a good overview of the issues being addressed and some changes we can expect to see in nonprofit financial statements in the next few years.
