Where to Start with New Accounting Standards

Posted on Aug 5, 2019

There are now several new accounting standards that not-for-profits will need to implement over the next few years. With more likely coming down the pipeline, many not-for-profits are asking for advice to follow when implementing new standards. Here are steps to consider:

Getting Started:

  • Designate an internal champion to perform an assessment of the new standard’s impact on the organization.
  • The first order of business should be to determine if the standard applies to your organization. You can find electronic versions of the new standards at fasb.org.
  • Read the standard, and do not skip the Background Information and Basis for Conclusions section; it is very helpful for gaining context and understanding the “why” of the standard.
  • Ideally, the champion should have at least one other team member to help perform the assessment and read through the new standard. It helps to share notes and gather multiple perspectives on how the standard might apply to the organization and how to best implement it.

Next Steps:

  • Read through the standard twice. On the second time through, highlight the sections of the standard that apply to the organization. It is helpful to also highlight (in a different color) areas still unclear or that you have questions on. You can come back to those later when doing follow up research or gaining insights from your independent auditors, consultants, or instructors of seminars on the new standard.
  • Determine the effective date. Please note that if your organization has publicly traded tax-exempt debt, the effective date for public entities may apply to your organization.
  • Create a standard template for documenting the name of the new standard, when it will be effective, how the standard applies to your organization, what transaction classes or balances are affected, and what new disclosures will be required. (Note, if you have publicly traded tax-exempt debt, you might have additional disclosure requirements that apply to public entities).
  • Develop a timeline and game plan for analyzing and implementing the new standard.
  • Determine if you will need additional internal or external resources to implement the new standard.

Continuing Education:

  • Read articles (i.e. Journal of Accountancy) and attend seminars or webinars on the new standard.
  • Ask your independent auditors if they have any tools or education opportunities that can help in implementing the new standard.
  • Reviewing the AICPA Accounting and Auditing Guides will also helpfully guide implementing the new standard.

Analyzing the Impact:

  • Identify the population of existing agreements, balances, or types of transactions impacted or to be analyzed under the new standard. Document your conclusions on the impact for each agreement, balance, or transaction type.
  • Determine what business processes, reporting, data capture, or systems will need to change. It is best to involve IT early in this part of the analysis.
  • Determine what new internal controls or modifications to existing policies and procedures will be needed.
  • Determine what practical expedients it makes sense to adopt and document your election to do so.
  • If there are options for the year of adoption, determine which option best fits the needs of the organization.
  • Proforma the impact of the new standard on the financial statements and draft any new note disclosures. Pro-tip: Since many universities and hospitals have publicly traded tax-exempt debt and generally have to implement new standards before most not-for-profits, it is helpful to look up their financial statements on publicly available sites such as their website, EDGAR, or, if they have a Single Audit performed, on the federal audit clearinghouse website. Your independent auditor often can give some sample financial statements or note disclosures that comply with the new standard.

Reviewing and Implementing:

  • Have your independent auditors and Finance and/or Audit Committee review and provide feedback on your assessment, draft new note disclosures, proforma financial statements, and any proposed changes to the organization’s internal controls or policies and procedures.
  • After approval, use your documentation to socialize the change and develop internal training on the new standard and how it will affect the organization.
  • Finally, execute your implementation plan and high-five your auditors when they say “You nailed it!”

We encourage you to begin implementing new standards early; hopefully these steps will help you get started. If you have any further questions, contact a Clark Nuber professional.

© Clark Nuber PS, 2019. All Rights Reserved

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This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.

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