Availability and Liquidity Disclosure

With the existing Liquidity and Availability disclosures required for non-profit organizations, there is certain qualitative and quantitative information that should be disclosed. The purpose of this disclosure is to show how a non-profit entity can manage its resources to meet needs for cash within one year of the date of the Financial Statements. This information is vital and beneficial for several reasons for an organization. For example, this information aids in portraying the financial health of the organization. Additionally, it is one way for external users of the financial statements to determine the organization’s ability to continue operations. A suggestion to users is to compare this information to the operational expenditures to the year. Also, a reader should also consider the current liabilities on the Statement of Financial Position when evaluating this information. Internally, this information will play a part in the budgeting and cash flow analysis.

Liquidity is defined as “the availability of resources to meet cash needs for general expenditures within one year of the date of the statement of the financial position” according to FASB. The most common assets that can be considered “liquid” for non-profits include cash, accounts receivable, pledges receivable, and short-term investments. Availability primarily refers to the period in which these funds are available for use, in this case one year for disclosure purposes in the financial statement.

In recap, Liquidity and Availability becomes a useful tool in adding information and transparency regarding an organization’s available resources and limits placed on resources to improve financial reporting and transparency for both internal and external users of the financial statements.