Gains or losses on investments will generally increase or decrease unrestricted net assets, unless
their use is limited by donor-imposed restrictions.
The removal, expiration or satisfaction of a donor imposed condition or restriction will result in a
transfer between temporarily restricted, permanently restricted or unrestricted support.
Although FASB 117 does not encourage or discourage further classifications such as operating and non-
operating etc., if the organization uses such terms these classifications must, at a minimum, be included
in a financial statement that reports the change in unrestricted net assets for the period.
STATEMENT OF FUNCTIONAL EXPENSES
Expenses result in decreases in unrestricted net assets. Expenses must be disclosed by functional
classification either in the Statement of Activities or in the footnotes:
Program Services generally include goods and services distributed to beneficiaries, customers, or
members to fulfill the purpose of a mission of the organization.
Management and General activities include general oversight, business management, general
record keeping, budgeting, finance and other management and administrative activities.
Fund Raising activities include publicizing and conducting fund-raising campaigns, maintaining
donor mailing lists, conducting special fund-raising events, preparing and distributing activities
involved in the solicitation of contributions from individuals, foundations, government agencies,
etc.
Membership Development activities include soliciting for prospective members and membership
dues, membership relations, and similar activities.
Voluntary health and welfare organizations are required to continue to report information about
expenses by functional and natural classification in matrix format in a separate financial statement.
Other not-for-profit entities are required to report functional classifications and are encouraged, but not
required, to provide information about the natural classification of expenses.
STATEMENT OF CASH FLOWS
FASB 117 amends a number of sections of FASB 95 to require not-for-profit organizations to include a
Statement of Cash Flows as part of a complete set of financial statements.
FINANCIAL STATEMENT DISCLOSURES
Both FASB 116 and 117 require specific disclosures for not-for-profit entities and encourage certain
other financial statement disclosures.
Contributed Services – An entity that receives contributed services must describe the programs
or activities for which the services were used, the nature and extent of the contributed services
received during the period and the amount recognized as revenue. Entities are encouraged to
disclose the fair value of contributed services received but not recognized as revenues, if it is
practical to do so.
