FASB Discusses Nonprofit Partner Consolidation Guidance
During its meeting on March 30th, the Financial Accounting Standards Board (“FASB”) discussed its project on clarifying when a nonprofit general partner should consolidate a for-profit limited partnership or similar entity. Topics covered included outreach performed on potential alternatives, the transition method and whether the FASB should draft a proposed Accounting Standards Update (ASU). As a result of the discussions, the FASB reached the following decisions:
- The current practice for nonprofit general partners was preserved by reinstating the consolidation guidance that existed in Subtopic 810-20, Consolidation—Control of Partnerships and Similar Entities, and adding it to Subtopic 958-810, Not-for-Profit Entities—Consolidation.
- Because the consolidation guidance was reinstated, the FASB decided not to replace the guidance associated with special-purpose-entity lessors from Subtopic 958-810. The FASB also decided not to conduct further outreach on the special-purpose-entity guidance.
- The FASB will offer transition guidance due to the early adoption of ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. When adopting the amendments in ASU No. 2015-02, nonprofits would apply the proposed guidance using a modified retrospective method. Such entities would record a cumulative-effect adjustment to equity at the start of the fiscal year of adoption, or apply the amendments retrospectively.
- Nonprofits that have yet to adopt ASU No. 2015-02 would apply the proposed amendments using the same effective date and transition provisions in Update 2015-02.
FASB staff members were ordered to draft a proposed ASU with a 60-day comment period.
Topics: Consolidation (Topic 810): Amendments to the Consolidation Analysis, Consolidation—Control of Partnerships and Similar Entities (Subtopic 810-20), Financial Accounting Standards Board "FASB", Not-for-Profit Entities—Consolidation (Subtopic 958-810)