This background paper provides an overview of the requirements for reporting functional expenses in the financial statements of a not-for-profit entity and offers some tips for designing and optimizing a nonprofit's expense allocation system.
The AICPA Not-for-Profit Section membership offers the critical insights, tools, resources, and learning opportunities you need to successfully serve NFPs, including a full set of illustrative financial statements. For practical implementation tips, check out the following exclusive NFP Section member resources:
Issue analysis – natural and functional class presentation – This issue analysis includes examples of disclosure options that could meet the requirements of FASB ASU No. 2016-14.
Functional expenses: A revised focus for not-for-profit auditors – FASB ASU 2016-14 raises three big questions — here are the answers.
Functional expense schedule best practices for not-for-profits – Read about best practices for nonprofits to keep in mind as they prepare functional expense schedules.
Statement of functional expenses: GAAP vs. tax – In this archived NFP section webcast, learn how the statement of functional expenses for audited financial statements differs from a Form 990.
Top 7 functional expense allocation errors – Preparing a statement of functional expenses can be more complicated than you think. Be aware of these common mistakes as you navigate the allocation process.