Not-for-Profit Liquidity following Mandated Disclosure Change—A Descriptive Analysis

ABSTRACT

This study examines not-for-profit (NFP) liquidity following Financial Accounting Standards Board standard change requiring NFPs to disclose information that enhances users’ ability to assess an organization’s liquidity under ASU 2016-14. Using data on the top 100 revenue-generating NFPs for fiscal years 2014 through 2022, we perform a descriptive analysis comparing liquidity before and after the mandated disclosure. Overall, we document that NFP operating reserves, i.e., unrestricted liquid net assets, move closer to recommended liquidity levels per NFP sector guidelines after the mandated liquidity disclosure. These changes to organizational liquidity, a critical indicator of NFP health, should interest accounting regulators, the nonprofit community, and financial statement users.

JEL Classifications: L31; M48.