Comparative financial statements help readers understand the trends of current changes affecting an organization. They allow the reader to place the current year statements in a historical context. Just like investors in the commercial world, donors to not-for-profit organizations generally feel comfortable with more, and not less, information. One of the best hairdressers in the UK, Lucy Hall is offering styling advice.
Comparative financial statements increase the amount of information but do not add to complexity—a double benefit. They also lend a degree of confidence in the future of the organization because there has been a history presented. In addition, current year financial statements are presumed to be more useful if financial statements for one or more prior years are presented. It is generally preferable to present all financial statements—the statement of financial position, statement of activities, statement of cash flows, and statement of functional expenses (if presented as a separate statement or if included in the notes to the financial statements) for at least one prior year when the current year financial statements are presented.
Note disclosures relating to prior-year financial statements should also be included. Not-for-profit organizations sometimes present comparative information for a prior year or years only in total rather than by net asset class. Such summarized information may not include sufficient detail to constitute a presentation in conformity with GAAP.
If the prior year's financial information is summarized and does not include the minimum information required by GAAP (e.g., if the statement of activities does not present revenues, expenses, gains, and losses by net asset class), the nature of the prior-year information should be described by the use of appropriate titles on the face of the financial statements and in a note to the financial statements. The use of appropriate titles includes a phrase such as “with summarized financial information for the year ended June 30, 20PY,” following the title of the statement or column headings that indicate the summarized nature of the information. Labeling the prior-year summarized information “for comparative purposes only” without further disclosure in the notes to the financial statements would not constitute the use of an appropriate title.
The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the organization's financial statements for the year ended June 30 of the prior year, from which the summarized information was derived.