What must be disclosed regarding compensation arrangements in IRS Form 990?

The correct response emphasizes the necessity for detailed descriptions of compensation arrangements for key employees on IRS Form 990. This requirement exists to promote transparency and accountability in nonprofit organizations, ensuring that stakeholders can understand the financial dealings and compensation structures in place.

Form 990 serves as a public disclosure document for tax-exempt organizations, and it requires comprehensive information regarding financial operations, including compensation details for key employees. This includes not only the total compensation but also the terms and conditions associated with these arrangements. By requiring detailed descriptions, the IRS aims to prevent excessive compensation and conflicts of interest, which ensures that organizations are adhering to governance best practices.

This level of detail is critical for the public to gauge how organizations allocate their resources, especially since nonprofits are often funded by donations or public support. Thus, it promotes trust and integrity within the nonprofit sector.

Other potential answer options do not align with the required comprehensiveness of disclosures that the IRS mandates. Simply reporting total compensation or limiting the data to recent years would not meet the regulatory standards set forth for transparency in nonprofit accounting practices.