The change in net assets shall articulate to the net assets or equity reported in the statement of financial position and it shall be referred to using a descriptive term such as change in net assets or change in equity.
A statement of activities shall report gains and losses recognized on investments and other assets (or liabilities) as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor stipulations or by law that extends donor restrictions. For example, net gains on investment assets, to the extent recognized in financial statements, are reported as increases in net assets without donor restrictions unless their use is restricted by a donor to a specified purpose or future period or by law that extends donor restrictions. See paragraphs for additional guidance about reporting investment gains and losses, and paragraphs 958-205-45-13 through 45-13H for additional guidance about reporting gains and losses on endowment funds. See paragraph
958-310-45-3 for additional guidance about bad debt expenses and losses.
Classifying revenues, expenses, gains, and losses within classes of net assets does not preclude incorporating additional classifications within a statement of activities. For example, within a class or classes of changes in net assets, an NFP may classify items as follows: - a
Operating and nonoperating
- b
Expendable and nonexpendable
- c
Recognized and unrecognized
- d
Recurring and nonrecurring
- e
In other ways.
(P) December 16, 2026; (N) December 16, 2026
105-10-65-10Classifying revenues, expenses, gains, and losses within classes of net assets does not preclude incorporating additional classifications within a statement of activities. For example, within a class or classes of changes in net assets, an NFP may classify items as follows: - a
Operating and nonoperating
- b
Expendable and nonexpendable
- c
- d
Recurring and nonrecurring
- e
In other ways.
Some limitations on an NFP's use of an intermediate measure of operations are imposed by other Subtopics.
If a subtotal such as income from operations is presented, it shall include the following amounts: - a
An impairment loss recognized for a long-lived asset (asset group) to be held and used, pursuant to paragraph 360-10-45-4 - b
Costs associated with an exit or disposal activity that does not involve a discontinued operation, pursuant to paragraph 420-10-45-3 - c
A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a component of an entity that qualifies for discontinued operations treatment, as defined in Subtopic 205-20, and pursuant to paragraph 360-10-45-5.
In addition, the subtotal such as income from operations shall exclude the components of net periodic pension cost and net periodic postretirement benefit cost other than the service cost component, pursuant to paragraph 958-715-45-3. Reclassifications of net assets—that is, simultaneous increases in one net asset class and decreases in another—shall be made if any of the following events occur: - a
The NFP fulfills the purposes for which the net assets were restricted.
- b
- c
A donor withdraws, or court action removes, previously imposed restrictions.
- d
See paragraphs
for additional information about the expiration of donor-imposed restrictions.
Direct internal investment expenses do not include items that are not associated with generating investment return. For example, the costs associated with unitization and other such aspects of endowment management would not be allocated.
A statement of activities may report gains and losses as net amounts if they result from peripheral or incidental transactions or from other events and circumstances that may be largely beyond the control of the NFP and its management. Information about their net amounts generally is adequate to understand the NFP's activities. For example, an entity that sells land and buildings no longer needed for its ongoing activities commonly reports that transaction as a net gain or loss, rather than as gross revenues for the sales value and expense for the carrying value of the land and buildings sold. The net amount of those peripheral transactions, used with information in a statement of cash flows, usually is adequate to help assess how an entity uses its resources and how managers discharge their stewardship responsibilities.
The frequency of the events and the significance of the gross revenues and expenses distinguish major or central events from peripheral or incidental events. Events are ongoing major and central activities if they are normally part of an NFP's strategy and it normally carries on such activities or if the event's gross revenues or expenses are significant in relation to the NFP's annual budget. Events are peripheral or incidental if they are not an integral part of an NFP's usual activities or if their gross revenues or expenses are not significant in relation to the NFP's annual budget. Accordingly, similar events may be reported differently by different NFPs based on the NFP's overall activities.
An NFP may report net amounts for its special events if they result from peripheral or incidental transactions. However, so-called special events can be ongoing and major activities; if so, an NFP shall report the gross revenues and expenses of those activities. Costs netted against receipts from peripheral or incidental special events shall be limited to direct costs. See Example 4 (paragraph
958-220-55-11) for three possible methods of complying with this requirement.
Gains and losses on the investments of a
donor-restricted endowment fund are classified in accordance with paragraphs
958-205-45-13 through 45-13H.
Some NFPs, primarily health care entities, would like to compare their results to business entities in the same industry. An NFP with those comparability concerns may report in a manner similar to business entities by classifying debt securities as available for sale or held to maturity as described in paragraphs and excluding the unrealized gains and losses on those securities (which are recognized in accordance with Subtopic 958-320) from an operating measure within the statement of activities. Not-for-profit, business-oriented health care entities, however, are required to exclude certain gains and losses from a performance measure (see paragraph
954-220-45-9).
In general, amounts reported in an NFP's financial statements shall be based on the nature of the underlying transactions rather than on budgetary designations.