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NFPO Combinations – NFP Advisory Committee

Date recorded:

At its meeting on April 8, 2019, the Committee provided feedback on the staff’s draft of the proposed guidance for mergers and acquisitions. The Committee recommended that:

  1. not-for-profit organizations should refer to Section 1582, Business Combinations, in Part II of the Handbook to account for the acquisition of a for-profit enterprise;
  2. guidance on the accounting for a combination involving not-for-profit organizations, including when the combination is accounted for as an acquisition, should be provided in Part III of the Handbook;
  3. consideration be given to the combining entities when either or both entities are limiting the application of Section 4433, Tangible Capital Assets Held by Not-for-Profit Organizations, or Section 4434, Intangible Assets Held by Not-for-Profit Organizations, as average annual revenues in the current and preceding periods of the organization and any entity it controls is less than $500,000;
  4. the proposals are clear as to which standard the NFPO should be applying (i.e.- the proposals refer to initial measurement.) If the combination results in an acquisition, subsequent measurement is prescribed in Section 4450, Reporting Controlled and Related Entities by Not-for-Profit Organizations; and
  5. illustrative examples be added to the proposals to help NFPOs analyze the criteria for determining whether the transaction is considered an acquisition or a merger and the mechanics of accounting for the transaction if considered a merger.

The AcSB will discuss the Committee’s input and review the timeline of the exposure draft at the May 2019 Board meeting.

Review the summary of discussions on the AcSB's Web site.

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