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2022 Updates to GAAP Standards

By | Accounting, FASB, Nonprofit, Uncategorized | No Comments

person using calculator at desk with spreadsheetsWe typically report on changes to GAAP standards as they arise. This year has been a particularly active one with numerous changes impacting leases, gifts in kind, reference rate reform, and costs associated with cloud computing. Below are the highlights; for specifics, see the linked information.

Topic 842: Lease Standards

FASB 842

Although the standard was presented six years ago, it must now be fully implemented for all entities reporting on a GAAP basis for calendar year 2022 and fiscal years ending in 2023. The accounting standards for lessors has not changed. However, there are several changes for lessees which must be included on the balance sheet.

Lessees’ commitments and rights can now be recognized on the balance sheet as a liability for the total payments made throughout the term of the lease. The “right to use” the asset can also be recognized as a liability on the balance sheet.

Lease classifications have also changed. Instead of operating and capital leases, they are now to be classified as operating or financing.

Topic 958: Gifts-In-Kind

Update 2020-07

Effective for all entities for calendar year 2022, reporting after June 15, 2021, there are changes to reporting gifts-in-kind (GIK). The standard to determine whether something is a gift hasn’t changed, but the reporting requirements have been updated.

You will need to disclose specific information for each category:

  • Your organization’s policy for gifts-in-kind.
  • Potential donor-imposed restrictions on GIK.
  • How you arrived at the value determination and fair market value.
  • Whether GIK was monetized or utilized.

For more information, please read: An Overview of Gifts—In-Kind

Reference Rate Reform

Topic 848

ASU 2020-04

LIBOR, or the London Inter-Bank Offer Rate, has been the norm since the 1980s as a reference rate for interest. Now, however, it is being retired as a point of reference. This change is effective March 2022 through December 2022 and impacts many loans, leases, and derivatives.

The current GAAP requirement is that entities analyze whether a change in interest rate for a loan is a debt modification or debt extinguishment. This is time-consuming and can be quite complicated. Refer to ASU 2020-04 for helpful tips to make the transition easier and smoother.

Cost Associated with Cloud Computing

ASU 2018-15 Subtopic 350-40

This change is effective for nonpublic entities for the calendar year 2021 and fiscal years ending in 2022. Entities may choose to apply it either prospectively or retrospectively.

Cloud computing software is used on a licensing arrangement. Either the license is a subscription or a license. Licenses are usually recorded as an intangible asset for the software license and a liability for remaining payments due. For subscription-based cloud software, it is expensed as incurred.

For more information on this topic, read: New FASB Cloud Computing Standard Reduces Complexity.

Need Help Navigating GAAP Changes?

If you’d like some assistance navigating these GAAP changes, we’re here to help. We can also assist you with choosing the right nonprofit software to make accounting, including following accepted best practices, and implementing changes to your general ledger and overall accounting software.

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Turning Raw Data Into Engaging Stories: Data Visualizations

By | Data, Nonprofit, Uncategorized | No Comments

Nonprofits often struggle to engage donors and constituents in their work. Often, their work, whether it is in the arts, human services, healthcare, humane societies, or education, remains hidden.

But the more work remains hidden from the public, the less interest and engagement a nonprofit will experience. Raw facts and figures aren’t interesting. People have trouble understanding and interpreting data. Although sites like Charity Navigator do a good job of providing basic metrics, they fail to put a face or a name to the work done by each nonprofit.

That’s where data visualization comes into play. The data your organization collects can be a powerful ally in your quest to reach more constituents, deliver programs and services, and engage donors.

What Is Data Visualization?

Data visualization uses information (data) and transforms it into charts, graphs, and other pictorial representations (visualization).

People tend to have a very hard time putting data into context. A list of years and the number of people who contract a disease vs. those who die from it lacks context. Change that list into a picture, and it’s easier to imagine that 1 out of every 5 people will die from cancer in a given year.

How Does Data Visualization Work?

Many organizations add business intelligence, or BI software, to their basic accounting systems to add data visualization capacities to their overall system. This helps them:

  1. Prepare better annual reports by including robust charts and graphs
  2. Engage the media in your work by sharing story-based graphics reporters can use
  3. Publish visualizations to their website and donor sites, adding information in a format easily understood by constituents
  4. Apply for grants with clearer and better information

A Tale of Tails: Data Visualization in Action

The Best Friends Society seeks to transform shelters into no-kill shelters, or shelters where animals are not humanely euthanized but kept at the shelter until adopted. The organization had collected data from 2015 on the state of animal adoptions nationwide but needed a way to publish it so that visitors to their site and people interested in their work could understand the urgent need to save more companion animals.

The organization responded to the challenge by investing in data analytics and business intelligence that transformed raw data into engaging, responsive graphics on their website. The resulting data visualizations may be seen on many pages on their site, for example, such as the interactive map of the United States that responds to changing demographics as the dataset is updated in the background.

According to Michael Kabella, interim CIO of Best Friends/Save Them All, in a streaming interview entitled Making Data Actionable: How Best Friends Animal Society Scaled Innovation on Behalf of 6M Furry Friends “ … the new dataset, being able to interact with it in new ways, allowed our mission, advancement, and programming teams, to really make informed, strategic, and tactical decisions that often, in the past, might have been driven by an intuition.”

He also relayed positive responses and benefits from sharing the new data visualizations with supporters and donors. “We also found out that our supporters and donors really responded positively to the visuals. It gave them an ability to identify with the information in a way that previously they hadn’t been able to with a spreadsheet of data. Because of that, we saw an impact on life saving and on donations.”

Cloud-based software is rapidly making robust nonprofit accounting software more affordable. It’s also easier to add on business intelligence and data visualization tools than ever before. Considering that nonprofits like Best Friends/Save Them All believe that adding this software made a big difference on saving the lives of companion animals, it may be worthwhile investigating it for your organization.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at (206) 605-3113 for more information.

Welter Consulting Joins Formal Strategic Alliance with Top Community Brands Business Partners

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Broader reach, greater access, and expanded networks gives this company a renewed sense of love for their mission

Welter Consulting LLC today announced that their company has joined a formal strategic alliance with four top Community Brands Business Partners including ProSoft Solutions, 1st Choice Advisors, Software Simplified, and Whittlesey Forward Advising. This strategic decision was made to further Welter’s commitment: to find customers the most affordable technology, the most powerful solution, and provide expert support.

This alliance gives Welter Consulting clients access to a greater capacity, bandwidth, and coverage while also furthering the geographical reach of those services. With a wide range of product expertise, the alliance can support clients with an impressive variety of technology needs from accounting, to networking, to hosting. It also includes increased availability for fundraising, HR, timekeeping, procurement, budgeting and forecasting, banking integration, and much more.  Clients will also have expanded access to conferences, user groups, and training opportunities.

“I went into this business because I care about my clients’ outcomes,” said Vicki Welter, Founder of Welter Consulting LLC, “I want to be a part of helping them carry out their unique goals and missions: this alliance will better equip me to achieve that.” 

With expanded communication, increased influence with Community Brands, Welter said, “As an organization, we have a renewed love for our jobs because of this expanded team environment.”

Now with easy and available access to the BDO Network, and additional expertise in any area that encompasses accounting, audit, technology, and cyber security, Welter Consulting clients have a local, highly-skilled solution at their fingertips.