The AICPA has released the 2025 edition of the Not-for-Profit Entities Audit and Accounting Guide, incorporating new and updated guidance that directly affects nonprofit organizations. The updated guide includes changes in accounting and auditing practices, with new provisions on the use of technology in audits, accounting for contract assets, and more. This blog will highlight the significant updates and how they impact nonprofit financial reporting.
The Authority of the A&A Guide
The AICPA’s Audit and Accounting Guides are designed to assist auditors and accountants in preparing financial statements in accordance with U.S. GAAP. When the Guide offers guidance on accounting matters not addressed by the FASB ASC, the advice is considered nonauthoritative. However, for auditing guidance, the Auditing Standards Board (ASB) treats the A&A Guide as an interpretive publication, which auditors should consider when planning and performing audits. If guidance in the A&A Guide is not followed, auditors must document how they complied with GAAS.
New Guidance in the 2025 A&A Guide
The 2025 edition includes several updates that reflect new and effective guidance as of March 1, 2025, and some upcoming changes effective by June 30, 2025. A few key highlights include:
- ASU 2025-01: Expense Disaggregation Disclosures – This update clarifies the effective date for changes to the Income Statement under FASB ASC 220-40, particularly for expense disaggregation and reporting requirements.
- SAS 149 – Addressing audits of group financial statements, this standard provides clarity on the responsibilities of auditors when dealing with component auditors and referred-to auditors. It’s especially relevant for audits involving complex structures and multiple entities.
- FASB ASC 2021-08 – The Guide includes provisions on business combinations and accounting for contract assets and liabilities under Topic 805. This update impacts the way organizations recognize and measure transactions involving contracts with customers.
- FASB ASC 848 – The Guide notes the sunset date for Reference Rate Reform under FASB ASC 848, which expired on December 31, 2024. This affects organizations managing financial instruments tied to the LIBOR rate.
Key Changes in the 2025 Guide
Several significant changes have been incorporated, making it essential for nonprofits to familiarize themselves with the latest practices. Some important sections include:
- Appendix A: This section outlines the FASB Accounting Standards Codification 958, detailing subtopics and sections in the Not-For-Profit Entities topic to help users navigate the structure of FASB ASC.
- Appendix C: Addresses the upcoming SQMS 1 standard, which will affect firms’ accounting and auditing practices as of December 15, 2025.
- Paragraph 3.140: Reflects the changes introduced by FASB ASC 2021-08 on business combinations and contract liabilities, making it crucial for auditors working with nonprofits involved in complex transactions.
- Paragraph 5.186: Notes the supersession of FASB Concepts Statement 5, impacting recognition and measurement in nonprofit financial statements.
Practical Considerations
- The March 2025 edition of the A&A Guide is available on Checkpoint, or you can order it directly from the AICPA website for detailed reference.
- Nonprofits should periodically review the Audit and Accounting Guide to stay up-to-date with changes in accounting and auditing requirements and ensure compliance with new standards.
The 2025 AICPA Not-for-Profit Entities A&A Guide is an essential resource for nonprofits and auditors alike. It provides detailed guidance on the latest accounting and auditing practices, ensuring nonprofits stay compliant with U.S. GAAP and make informed decisions about their financial reporting. By understanding these updates and changes, nonprofits can continue to operate efficiently and transparently, securing the trust of donors, funders, and regulators.
