# ASC 210-958-05: Balance Sheet — Not-for-Profit Entities — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/210/958/#05-overview-and-background)

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## ASC 210-958-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/210/958/#05-overview-and-background)

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##### [210-958-05-1](https://asc.understandingaccounting.org/asc/210/958/#210-958-05-1)

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This Subtopic provides guidance addressing the statement of financial position 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). A statement of financial position is the financial statement of an NFP that corresponds to the balance sheet of a business entity.

##### [210-958-05-2](https://asc.understandingaccounting.org/asc/210/958/#210-958-05-2)

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The primary purpose of a statement of financial position is to provide relevant information about an NFP's assets, liabilities, and net assets and about their relationships to each other at a moment in time. The information provided in a statement of financial position, used with related disclosures and information in other financial statements, helps donors, members, creditors, and others to assess the following:

1.  a
    
    The NFP's ability to continue to provide services
    
2.  b
    
    The NFP's [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."), [financial flexibility](https://asc.understandingaccounting.org/glossary/f/#financial-flexibility "The ability of an entity to take effective actions to alter amounts and timing of cash flows so it can respond to unexpected needs and opportunities."), ability to meet obligations, and needs for external financing.