# ASC 205-958-05: Presentation of Financial Statements — Not-for-Profit Entities — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/205/958/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:590318c65eb48fcc9e6ce11e2d3d88602e739008e5956404f5ad906f63fae49d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 205-958-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/205/958/#05-overview-and-background) SEC content: no ##### [205-958-05-1](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:8411f09af7b6abfd714a3241053f29c007f4d2d0a7d040f53a60cfc5a7dba276 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic discusses the presentation of financial statements for [not-for-profit entities](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFPs), including the following items: 1. a The objectives of financial reporting by NFPs 2. b A complete set of financial statements 3. c Statement of functional expenses 4. d Comparative financial statements 5. e Expiration of restrictions 6. f Reporting endowment funds 7. g Disclosures of a general nature that do not belong with other Subtopics. ##### [205-958-05-2](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:a2cd06860aae2b4dd19d35b5a064351cae122318dda7cdd4c231c92889e7b05e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Additional information concerning the reporting model of an NFP can be found in the following Subtopics: 1. a Not-for-Profit Entities—Balance Sheet, Subtopic 958-210 2. b Not-for-Profit Entities—Income Statement, Subtopic 958-220 3. c Not-for-Profit Entities—Statement of Cash Flows, Subtopic 958-230. #### Purpose of Financial Statements ##### [205-958-05-3](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:c42bcddab1c79ab26146f7b30b819439b0fe29dcdcfb06ecb79cbef2c8bcec38 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The primary purpose of financial statements is to provide relevant information to meet the common interests of donors, members, creditors, and others who provide resources to NFPs. Those external users of financial statements have common interests in assessing both of the following: 1. a The services an NFP provides and its ability to continue to provide those services 2. b How managers discharge their stewardship responsibilities and other aspects of their performance. ##### [205-958-05-4](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:272c6e768637f450b7d4d356772c0bd93b10d65540e5c813be9c4347f52d5ad4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. More specifically, the purpose of financial statements, including accompanying notes, is to provide information about all of the following: 1. a The amount and nature of an NFP's assets, liabilities, and net assets 2. b The effects of transactions and other events and circumstances that change the amount and nature of net assets 3. c The amount and kinds of inflows and outflows of economic resources during a period and the relation between the inflows and outflows 4. d How an NFP obtains and spends cash, its borrowing and repayment of borrowing, and other factors that may affect its [liquidity](https://asc.understandingaccounting.org/glossary/l/#liquidity "An asset's or liability's nearness to cash. Donor-imposed restrictions may influence the liquidity or cash flow patterns of certain assets. For example, a donor stipulation that donated cash be used to acquire land and buildings limits an entity's ability to take effective actions to respond to unexpected opportunities or needs, such as emergency disaster relief. On the other hand, some donor-imposed restrictions have little or no influence on cash flow patterns or an entity's financial flexibility. For example, a gift of cash with a donor stipulation that it be used for emergency-relief efforts has a negligible impact on an entity if emergency relief is one of its major ongoing programs.") 5. e The service efforts of an NFP. #### A Complete Set of Financial Statements ##### [205-958-05-5](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-5) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:178c7d7019664ea4928aa1c0cba836f6f9e7431d02b8f565a792a80413e86f00 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. General-purpose external financial statements provided by an NFP include a statement of financial position, a statement of activities, and a statement of cash flows. Individual financial statements provide different information, and the information each statement provides generally complements information in other financial statements. ##### [205-958-05-6](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-6) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:4ffe8416a7751578a8fa1230135246ef0a70bde175bb74cc0b15a78692cc2511 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. General-purpose financial statements classify and report net assets in two groups—[net assets with donor restrictions](https://asc.understandingaccounting.org/glossary/n/#net-assets-with-donor-restrictions "The part of net assets of a not-for-profit entity that is subject to donor-imposed restrictions (donors include other types of contributors, including makers of certain grants).") and [net assets without donor restrictions](https://asc.understandingaccounting.org/glossary/n/#net-assets-without-donor-restrictions "The part of net assets of a not-for-profit entity that is not subject to donor-imposed restrictions (donors include other types of contributors, including makers of certain grants).")—based on the existence or absence of [donor-imposed restrictions](https://asc.understandingaccounting.org/glossary/d/#donor-imposed-restriction "A donor stipulation (donors include other types of contributors, including makers of certain grants) that specifies a use for a contributed asset that is more specific than broad limits resulting from the following: The nature of the not-for-profit entity (NFP) The environment in which it operates The purposes specified in its articles of incorporation or bylaws or comparable documents for an unincorporated association. Some donors impose restrictions that are temporary in nature, for example, stipulating that resources be used after a specified date, for particular programs or services, or to acquire buildings or equipment. Other donors impose restrictions that are perpetual in nature, for example, stipulating that resources be maintained in perpetuity. Laws may extend those limits to investment returns from those resources and to other enhancements (diminishments) of those resources. Thus, those laws extend donor-imposed restrictions.") and the nature of those restrictions. ##### [205-958-05-6A](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-6A) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:ed318200dd5451c11f55cf8f095b10ff9a2e026751aaa87ff1c8911af31670d6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Not-for-Profit Entities Topic uses certain statement titles and the terms _net assets without donor restrictions_ and _net assets with donor restrictions_. Other titles and other labels may also be used, as illustrated in paragraphs [958-205-55-2](https://asc.understandingaccounting.org/asc/205/958/#205-958-55-2) and [958-210-55-3](https://asc.understandingaccounting.org/asc/210/958/#210-958-55-3). ##### [205-958-05-6B](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-6B) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:22d0dd9509828f0bb8ce5ff49811925e35b046801de1b64f5b08d03dd1480166 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The two required net asset classes (with donor restrictions and without donor restrictions) are a minimum classification scheme, if they are applicable. An NFP can choose to further disaggregate the two net asset classes. For example, an NFP may wish to disaggregate net assets with donor restrictions between those expected to be maintained in perpetuity and those expected to be spent over time or for a particular purpose. However, paragraph [958-210-45-1](https://asc.understandingaccounting.org/asc/210/958/#210-958-45-1) does require that the amounts for each of the two classes of net assets and the total of net assets be reported in a statement of financial position. ##### [205-958-05-7](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-7) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:a18bea3e39ab538119d010c2195a7b800457f0cb06e8db20d9fb86bbc36e1f94 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Not-for-Profit Entities Topic does not use the terms fund balance or changes in fund balances because in current practice those terms are commonly used to refer to individual groups of assets and related liabilities rather than to an entity's net assets or changes in net assets taken as a whole. While reporting by fund groups is not a necessary part of external financial reporting, paragraph [958-205-45-3](https://asc.understandingaccounting.org/asc/205/958/#205-958-45-3) does not preclude providing disaggregated information by fund groups. #### Reporting Endowment Funds ##### [205-958-05-8](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-8) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:bc358446a766b726440e20515366cf9688c06b58cd96f48f1e2aa483c8fe59bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Laws concerning use of net appreciation of [endowment funds](https://asc.understandingaccounting.org/glossary/e/#endowment-fund "An established fund of cash, securities, or other assets to provide income for the maintenance of a not-for-profit entity (NFP). The use of the assets of the fund may be with or without donor-imposed restrictions. Endowment funds generally are established by donor-restricted gifts and bequests to provide a source of income in perpetuity or for a specified period. See Donor-Restricted Endowment Fund. Alternatively, an NFP's governing board may earmark a portion of its net assets as a Board-Designated Endowment Fund. See Funds Functioning as Endowment.") that are donor-restricted may vary from jurisdiction to jurisdiction. For example, most jurisdictions follow enacted versions of the Uniform Prudent Management of Institutional Funds Act of 2006 or similar legal guidance (including interpretations of the law issued by state Attorneys General) and some jurisdictions follow trust law. ##### [205-958-05-9](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-9) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:cbc2afc4c8a8d6c2e8991756982e0ccdaab9946483012a14c9b5da00f0dcad20 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because donor stipulations and laws vary, NFPs must assess the relevant facts and circumstances for their endowment gifts and their relevant laws to determine the classification of endowment funds within the NFP financial reporting model (see paragraph [958-205-45-2](https://asc.understandingaccounting.org/asc/205/958/#205-958-45-2)), including whether some or all of the investment return on endowments is available for spending. ##### [205-958-05-10](https://asc.understandingaccounting.org/asc/205/958/#205-958-05-10) Pending content: no Source downloaded (UTC): 2026-09-09T22:55:50.396Z to 2026-09-09T22:55:50.396Z Record version: sha256:7e029e58d79212f4320eb354ae06ffee2e3679d3cf29492de38e83abb277d550 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subsection 4(a) of the Uniform Prudent Management of Institutional Funds Act of 2006 provides that, unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. For related guidance, see paragraphs [958-205-45-13 through 45-13F](https://asc.understandingaccounting.org/asc/205/958/#205-958-45-13).