Reporting by fund groups is not a necessary part of external financial reporting; however, this Subtopic does not preclude providing disaggregated information by fund groups.
A complete set of financial statements of an NFP shall include a statement of financial position as of the end of the reporting period, a statement of activities and a statement of cash flows for the reporting period, and accompanying notes to financial statements.
A set of financial statements shall include, either in the body of financial statements or in the accompanying notes, information required by generally accepted accounting principles (GAAP) or required by applicable specialized accounting and reporting principles and practices unless NFPs are specifically exempt from providing that information.
Reporting expenses by nature and function is useful in associating expenses with service efforts and accomplishments of NFPs.
All NFPs shall report information about all expenses in one location—on the face of the statement of activities, as a schedule in the notes to financial statements, or in a separate financial statement—as required by paragraph 958-720-45-15. The relationship between functional classification and natural classification for all expenses shall be presented in an analysis that disaggregates functional expense classifications, such as major classes of program services and supporting activities by their natural expense classifications, such as salaries, rent, electricity, supplies, interest expense, depreciation, awards and grants to others, and professional fees. To the extent that expenses are reported by other than their natural classification (such as salaries included in cost of goods sold or facility rental costs of special events reported as direct benefits to donors), they shall be reported by their natural classification in the functional expense analysis. For example, salaries, wages, and fringe benefits that are included as part of the cost of goods sold on the statement of activities shall be included with other salaries, wages, and fringe benefits in the functional expense analysis. External and direct internal investment expenses that have been netted against investment return shall not be included in the functional expense analysis. Certain items that are typically reported in other comprehensive income of for-profit entities, such as those items listed in paragraph 220-10-45-10A, are considered gains or losses and, like other gains and losses, shall not be included in the functional expense analysis. See Note F in paragraph 958-205-55-21 for an example that illustrates the reporting of expenses by nature and function. NFPs sometimes present comparative information for a prior year or years only in total rather than by net asset class. Such summarized information may not include sufficient detail to constitute a presentation in conformity with GAAP. If the prior year's financial information is summarized and does not include the minimum information required by this Topic (for example, if the statement of activities does not present revenues, expenses, gains, and losses by net asset class), the nature of the prior-year information shall be described by the use of appropriate titles on the face of the financial statements and in a note to financial statements. The use of appropriate titles includes a phrase such as with summarized financial information for the year ended June 30, 19PY, following the title of the statement or column headings that indicate the summarized nature of the information. Labeling the prior-year summarized financial information for comparative purposes only without further disclosure in the notes to financial statements would not constitute the use of an appropriate title.
Unless donor stipulations limit the use of the assets for a period of time or for a particular purpose, donor restrictions on long-lived assets, if any, or cash to acquire or construct long-lived assets are considered to have expired when the assets are placed in service.
Donor-restricted endowment funds generally result from a donor's stipulation or by extension of a donor restriction imposed through UPMIFA that limits an NFP's use of an endowment fund. The original gifted amount, any additional gifts to that fund, and any resulting investment returns shall initially be classified as net assets with donor restrictions. Therefore, unless stated otherwise in the gift instrument, the assets in a donor-restricted endowment fund are donor-restricted assets until they are appropriated for expenditure by the NFP's governing board. Donors may provide specific instructions on spending from a donor-restricted endowment fund or from the components of investment return generated from the fund.
See Note E of Example 1 (paragraph
958-205-55-21) for an illustrative disclosure about endowment funds and investment management policies.