FASB ASU 2016-14 Reporting in QuickBooks Online

FASB ASU 2016-14 (Presentation of Financial Statements of Not-for-Profit Entities) changed how nonprofits present their financial statements. If you use QuickBooks Online, generating compliant reports requires some workarounds.

This guide explains the requirements and how to assemble the required presentation from QuickBooks Online records. ASUs describe amendments, while the FASB Accounting Standards Codification is the authoritative GAAP source after adoption.

What Changed with ASU 2016-14

The standard, effective for fiscal years beginning after December 15, 2017, made several significant changes:

Net Asset Classifications (Simplified)

Before ASU 2016-14:

• Unrestricted
• Temporarily Restricted
• Permanently Restricted

After ASU 2016-14:

• Without Donor Restrictions
• With Donor Restrictions

The historical three-category system collapsed to two. The former terms "temporarily restricted" and "permanently restricted" are historical terminology; both are now presented as "with donor restrictions," though you must disclose the nature of restrictions.

New Required Statements

Statement	What's New
Statement of Financial Position	Two net asset categories instead of three
Statement of Activities	Shows changes in net assets with and without donor restrictions
Expense analysis	All NFPs present expenses by both natural and functional classification in the statement of activities, a separate statement, or the notes
Statement of Cash Flows	Direct or indirect method allowed
Liquidity Disclosure	NEW: Qualitative and quantitative info required

The Liquidity Disclosure

This is entirely new. You must disclose:

• Financial assets available at the statement-of-financial-position date to meet cash needs for general expenditures within one year
• How you manage liquidity
• Any liquidity constraints

QuickBooks Online's Limitations

QuickBooks Online doesn't natively produce ASU 2016-14 compliant statements. Here's what's missing:

No Net Asset Tracking

QuickBooks Online has "equity" accounts but no concept of donor-restricted net assets. You must manually maintain the two-category breakdown.

No Functional Expense Matrix

The required expense analysis identifies:

• Function: Program services and supporting activities such as management and general and fundraising
• Nature: Salaries, benefits, supplies, and similar natural categories

Every expense is classified by function and nature. Costs benefiting more than one function are allocated using a systematic, reasonable method where applicable; this does not mean every expense must be split. QuickBooks Online reports may help provide inputs, but they do not by themselves establish a GAAP-compliant expense analysis.

No Liquidity Analysis

QuickBooks Online has no built-in liquidity disclosure tools.

Setting Up QuickBooks Online for ASU 2016-14

Step 1: Chart of Accounts Structure

Create equity accounts for net asset categories:

3000 - Net Assets
  3100 - Without Donor Restrictions
    3110 - Undesignated
    3120 - Board Designated
  3200 - With Donor Restrictions
    3210 - Purpose Restrictions
    3220 - Time Restrictions
    3230 - Perpetual (Endowments)

Step 2: Enable Tracking Features

1. Classes — Optional activity or reporting tags
2. Locations — Optional flat, transaction-level tags that may support functional reporting

Go to Settings > Account and Settings > Advanced to enable these.

Classes and Locations are not self-balancing funds. They do not establish restriction accounting, donor attribution, eligibility, or compliance. Choose dimensions and account design with your CPA.

Step 3: Consistent Transaction Coding

Every expense transaction needs:

• Correct expense account (nature)
• A documented functional classification, using a Location or another CPA-approved process
• Any optional Class used for activity reporting

Consistent coding supplies report inputs, but a P&L by Location does not automatically become a GAAP functional expense statement.

Generating ASU 2016-14 Statements

Statement of Financial Position

1. Run the Balance Sheet report
2. Export to Excel
3. Manually reclassify equity into:
   • Net Assets Without Donor Restrictions
   • Net Assets With Donor Restrictions
4. If comparative statements are required or elected, add the prior-year column and apply the applicable comparative-period presentation and disclosures

Statement of Activities

1. Run Profit & Loss by Class
2. Export to Excel
3. Create columns for:
   • Without Donor Restrictions
   • With Donor Restrictions
   • Total
4. Add row for "Net Assets Released from Restrictions"
5. Calculate change in net assets by category

Statement of Functional Expenses

This is the hardest one. You need a matrix of Nature × Function.

Option A: Manual Compilation

1. Run P&L by Location if your approved design uses Locations for functions
2. Ensure account detail shows nature
3. Apply documented shared-cost allocations and compile the presentation

Option B: Use Custom Report Builder

1. Create a custom report
2. Rows: Expense accounts (nature)
3. Columns: Locations (function), if that is your approved coding design
4. Reconcile and adjust the output under your CPA-approved policy

Option C: Third-Party Tools Some reporting tools can pull QuickBooks Online data and format it properly.

Liquidity Disclosure

Manually compile from QuickBooks Online data:

1. Financial Assets at Year-End:

   • Cash and cash equivalents
   • Accounts receivable
   • Pledges receivable (due within year)
   • Investments (if liquid)

2. Less: Amounts unavailable for general expenditure within one year:

   • Amounts unavailable because of donor restrictions or contractual limits
   • Amounts unavailable because of governing-board designations under the organization's policy

3. Equals: Available for General Expenditure

Restriction Releases and Revenue Recognition

A donor restriction is released when its applicable time or purpose restriction is satisfied—not mechanically whenever cash is spent. Releases are reclassification activity in the statement of activities and are reflected in ending net assets with and without donor restrictions. The QuickBooks Online account design and any entries needed to produce that presentation must follow the organization's CPA-approved policy; there is no universal journal entry.

Receipt, spending, and award dates also do not automatically determine revenue recognition. An unconditional contribution is generally recognized when promised or received, subject to applicable restrictions; a conditional contribution is recognized when its barrier is substantially overcome and any right-of-return or release-from-obligation condition is resolved; an exchange transaction follows the applicable revenue guidance. Have the organization's CPA approve the classification and recognition policy.

Common Compliance Mistakes

Mistake 1: Not Releasing Restrictions

Organizations can overstate net assets with donor restrictions when they fail to identify satisfied time or purpose restrictions and record the resulting reclassification under their approved policy.

Mistake 2: Wrong Functional Allocation

All expenses must be classified by function and nature. Common errors:

• Leaving expenses unallocated
• Inconsistent allocation methods
• Not systematically allocating shared costs where applicable

Mistake 3: Missing Liquidity Disclosure

The liquidity disclosure is required, not optional. Many organizations skip it.

Mistake 4: Inadequate Restriction Disclosure

You must describe the nature of restrictions in the notes. "With donor restrictions" alone isn't sufficient.

Audit Considerations

Auditors will look for:

• Two-category net asset presentation
• Functional expense matrix
• Net assets released calculation and support
• Liquidity disclosure (qualitative and quantitative)
• Restriction descriptions in notes
• Consistent allocation methodology

When QuickBooks Online Isn't Enough

Consider additional tools if:

• You have many restricted funds
• Functional allocation is complex
• Audit prep takes excessive time
• You're making errors in net asset tracking

Options include:

• Grant management software that tracks restrictions
• Nonprofit-specific accounting add-ons
• Migration to fund accounting software

Summary

ASU 2016-14 compliance in QuickBooks Online requires:

1. Proper chart of accounts setup
2. Consistent natural and functional classification using an approved coding design
3. Supported calculations and CPA-approved accounting for restriction releases
4. External compilation of required statements
5. Separate liquidity analysis

It's doable, but requires discipline and Excel skills. Organizations with complex restricted funds often benefit from specialized tools.

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How GrantLink supports this today

GrantLink helps by organizing allocations backed by QuickBooks Online, budget lines, fund receipts, funding shares, documents, report outputs, and activity history. It supports audit preparation, but it does not replace funder guidance, accounting policy, or professional review.

Per-grant Expenses links identify the QuickBooks Online records eligible for automatic allocation. To start a grant report, go to Chats > New Chat; completed reports then appear on that grant's Reports tab. The Money received UI label identifies relevant income or revenue records and does not necessarily mean cash receipts. GrantLink Releases can prepare and review release activity. Read-only mode never posts to QuickBooks Online, and a journal entry may be posted only through an explicit, supported permission and workflow.

GrantLink never rewrites QuickBooks Online automatically. Its shared QuickBooks Mapping settings are limited to restricted-account mappings; ordinary grant links and allocations remain per grant.

Sources

• FASB: ASU 2016-14 — net-asset classes, expense presentation, liquidity disclosures, and release presentation.
• FASB: ASU 2018-08 — contribution versus exchange analysis and conditional-contribution barriers.
• IRS: 2025 Form 990 instructions — current Part IX functional-expense instructions and the IRS's distinction between Form 990 reporting and ASC 958.