Under new accounting rules effective for fiscal years beginning after December 15, 2017, all nonprofits will now be required to show an analysis of expenses by both function and nature. Functional expense allocation can be challenging for nonprofits. Expenses must be divided among various functions, according to the purpose for which the costs are incurred.
- What nuances have changed in the new standard, even for those who have prepared a statement of functional expenses for years?
- What are the differences between the types of functional expense classifications — program services, supporting services, management and general expenses, and expenses incurred for fundraising?
- Which expense allocation method should be used — direct or indirect?
- Does expense allocation change for a federal grant?
Yeo & Yeo is pleased to offer an updated whitepaper, Functional Expense Allocation for Nonprofits after FASB ASU 2016-14, that explains functional classifications and other issues to consider in allocating expenses for your organization under the new accounting rules.
Beyond meeting compliance requirements, there are very good reasons to care about the functional classification of expenses, as they help tell the story of a nonprofit. If you have a question, reach out to Yeo & Yeo’s Nonprofit experienced professionals.