Not-For-Profit Organizations should be aware of changes the Financial Accounting Standards Board ("FASB") has made to certain accounting pronouncements that may have an effect on your financial statements.  For years ended after December 15, 2009, all non public entities preparing financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP) must adopt the accounting pronouncement FASB ASC 740-10 Accounting for Uncertainty in Income Taxes (the Pronouncement).

The Pronouncement applies to all GAAP based financial statements, other than personal financial statements, whether audited, reviewed or compiled. 

The Pronouncement, originally referred to as FIN-48, was issued in 2006 and has been in effect for public entities since that time.  Its enactment for all non public entities, including nonprofits, was delayed to provide guidance for pass-through entities (S-Corps, Partnerships, LLC's, etc.) and not for profit organizations.   The Pronouncement applies to all GAAP based financial statements, other than personal financial statements, whether audited, reviewed or compiled.

The Pronouncement requires the review and analysis of all "tax positions" taken by an entity and the potential for recording a liability for positions where it is "uncertain that the tax benefit will be allowed." 

For most clients where we prepare both the financial statements and information returns, we do not anticipate the need to record any additional tax liability and the only change you will see is additional footnote disclosures.  However, we will be required to perform additional analysis and we may request information that we have not requested in the past, including:

·      For all entities, we may have to more closely examine and perform additional analysis for a number of income tax related accounts.

·      Additional inquires may be made related to State income taxes and the locations in which the Organization is conducting business.

·      If we were not the preparer, we will request copies of income tax returns for all open years (typically three years).

·      The potential impact of unrelated business income tax will be considered.

·      We will request a copy of the original non-profit application (Form 1023 or 1024).

·      We will make inquiries and perform analysis to assure the current operations fall under the organization's approved tax exempt purpose.

As your accountants, our goal is to assist you in complying with the Pronouncement while minimizing the impact from the standpoint of additional demands on you and your staff, as well as additional accounting fees.