Where are gains and losses on investments typically reported in nonprofit financial statements?

Gains and losses on investments in nonprofit financial statements are typically reported in the statement of activities. This statement serves to summarize the nonprofit's revenues, expenses, and changes in net assets over a specific period. When an investment is sold, any gain or loss realized from that transaction is reflected in this statement.

This placement is aligned with the purpose of the statement of activities, which is to provide a clear picture of the nonprofit's financial performance, including how effectively resources are being managed. Reporting investment gains and losses here helps stakeholders understand the operational impact of investment activities on the overall financial health of the organization.

In contrast, the balance sheet primarily reports the organization's assets, liabilities, and net assets at a point in time, rather than the flow of activities that have occurred over a period. The cash flow statement focuses on the liquidity and cash movements of the organization, which doesn't directly capture gains or losses on investments in the same manner as the statement of activities. While important financial information can be conveyed through the notes to the financial statements, the specific effects of investment transactions are directly reflected in the statement of activities for clarity and relevancy.