Project Objective
The objective of this project is to develop standards of accounting and reporting for mergers and acquisitions of another entity by a not-for-profit (NFP) organization. In developing that standard, the Board expects to improve the completeness, relevance, and comparability of financial information about such mergers and acquisitions reported in the financial statements of NFP organizations. In addition, this project will provide guidance that assists NFP organizations in the application of FASB Statement No. 142, Goodwill and Other Intangible Assets.
At the inception of this project, the Board affirmed its longstanding view that similar transactions and circumstances should be accounted for similarly. The Board concluded that acquisitions by NFP organizations are similar in many respects to acquisitions made by business entities. Thus, the overall approach in this project has been to presume that the standards applicable to business enterprises (FASB Statement No. 141(R), Business Combinations) should be applied in accounting for acquisitions by NFP organizations unless a difference is identified that justifies a different accounting treatment.
*Due Process Documents
On May 9, 2008, the FASB and its Staff issued a request for additional comments on a potential revision to the October 2006 proposed Statement, Not-for-Profit Organizations: Mergers and Acquisitions, and for field visit volunteers. Comments are requested by July 8, 2008.
[Download Request for Additional Comments]
On October 9, 2006, the Board issued two Exposure Drafts:
- Not-for-Profit Organizations: Mergers and Acquisitions
[Download Exposure Draft]
[Download Comment Letters]
- Not-for-Profit Organizations: Goodwill and Other Intangible Assets Acquired in a Merger or Acquisition.
[Download Exposure Draft]
[Download Comment Letters]
The comment period for the two Exposure Drafts ended on January 29, 2007. The comment letters received, which are part of the project’s public record, are posted to the FASB’s website.
On December 4, 2007, the Board completed its project on business combinations for business enterprises and issued two Standards:
- Business Combinations (FAS 141)
- Consolidated Financial Statements, Including Accounting and Reporting of Noncontrolling Interests (FAS 160).
Because of the relationship between this project and the completed project on business combinations for business enterprises, the above Standards may provide additional insight about issues that the Board may reconsider during redeliberations on this project, independent of the comments received on the not-for-profit Exposure Drafts.
*Decisions Reached During Deliberations
September 2007 Meeting
As part of the redeliberations of the October 2006 Exposure Draft, Not-for-Profit Organizations: Mergers and Acquisitions, the Board reached the following decisions:
- The Board decided that a merger is different from an acquisition and, therefore, a different accounting treatment for mergers would be appropriate. The Board agreed that the feature that distinguishes a merger is control—in a merger, the governing bodies of two or more not-for-profit organizations cede control of those organizations to create a new organization. In an acquisition, one organization obtains control over the net assets of another organization or business.
- The Board affirmed that the acquisition method should be required for acquisitions by not-for-profit organizations. The Board decided that the carryover method of accounting should be retained for mergers between not-for-profit organizations. The Board considered but rejected suggestions that it also permit use of the carryover method of accounting for acquisitions by smaller not-for-profit organizations.
April 2008 Meeting
The Board approved an updated plan for its redeliberations and completion of the project by the end of 2008. As part of that plan, the Board agreed to:
- Continue with the existing plan of limiting the Board's substantive redeliberations to significant issues for which new information has arisen. Those issues include (a) differing accounting methods for mergers and acquisitions, (b) donor-related intangible assets (for example, donor lists and relationships), (c) initial recognition of goodwill or a contribution received, and (d) subsequent impairment testing of goodwill.
- Adhere to the scope and not address requests for more guidance or concerns about other GAAP that are outside the scope of the project, such as a request that the Board address perceived deficiencies in consolidation guidance applicable to not-for-profit organizations.
- Continue to adhere to the difference-based approach and affirmed that the Statement 141(R) post-Exposure Draft changes are to apply to acquisitions by not-for-profit organizations.
- Redirect the staff to conduct additional constituent outreach to solicit additional information about the workability of the "ceding control" notion for purposes of distinguishing a merger from an acquisition or other transactions outside the scope of the merger and acquisition proposal. The Board also agreed to utilize more efficient means for gathering that information rather than issuing a revised Exposure Draft.
*Board Meeting and Public Meeting Dates and Minutes
The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final Statement or Interpretation.
Below is a list of the Board meetings from 2002 through 2007. Minutes for meetings generally are posted within two weeks following the meeting.
| April 30, 2008 |
Board Meeting—Plan for Redeliberations |
| September 19, 2007 |
Board Meeting—Redeliberations: Potential Departure from the Acquisition Method |
| March 27, 2007 |
Roundtable Meeting—Discussion of the two October 2006 Exposure Drafts. The focal areas of that meeting were: "true mergers" among not-for-profit organizations, considerations for certain "small" not-for-profit organizations, recognition of donor-related intangible assets, recognition of goodwill, and accounting for acquired goodwill after the acquisition date. March 27, 2007 Meeting Materials |
| December 20, 2005 |
Board Meeting—Drafting issues, including a revisit of goodwill, contributions received, disclosures, effective date, and transition |
| January 26, 2005 |
Board Meeting—Discussion of (1) partially owned subsidiaries and noncontrolling ownership interests and (2) goodwill |
| July 27, 2004 |
Board Meeting—Discussion of scope |
| March 17, 2003 |
Board Meeting—Discussion of goodwill |
| February 26, 2003 |
Board Meeting—Discussion of disclosures, effective date, and transition |
| January 29, 2003 |
Board Meeting—Discussion of financial statement presentation, contingent consideration, and goodwill |
| December 18, 2002 |
Board Meeting—Discussion of project scope and goodwill |
| November 20, 2002 |
Board Meeting—Discussion of goodwill |
History and Background
In November 1999 the Board affirmed its earlier decision to undertake a project on mergers and acquisitions by a not-for-profit organization separate from its business combinations project. As a result of that decision, mergers and acquisitions by a not-for-profit organization are excluded from the scope of FASB Statement 141, Business Combinations. The Board also agreed to delay the effective date of Statement 142 as it applies to mergers and acquisitions by a not-for-profit organization, until the Board addresses the issues related to such combinations. That means that not-for-profit organizations will continue to account for mergers and acquisitions and acquired intangible assets following the guidance in APB Opinion No. 16, Business Combinations, and APB Opinion No. 17, Intangible Assets, until a final Statement resulting from this project is issued and effective.
The objective of this project is to develop guidance on the accounting and reporting for mergers and acquisitions by a not-for-profit organization. The following were among the reasons why the Board decided to undertake this separate project.
There is diversity in current practice. Some mergers and acquisitions by a not-for-profit organization have characteristics that distinguish them from business combinations. For example, some mergers or acquisitions do not include the exchange of cash or other assets as consideration. There are differing interpretations as to how the provisions of Opinion 16 should be applied to mergers and acquisitions by a not-for-profit organization, particularly those in which there is no exchange of consideration. Those differing interpretations have led to diversity in practice.
Guidance is needed due to the elimination of the pooling-of-interests method. Statement 141 eliminated the pooling-of-interests method (pooling method) for acquisitions by business enterprises. In practice today, many mergers and acquisitions by a not-for-profit organization are accounted for in a manner similar to the pooling method. This project is needed to provide guidance to not-for-profit organizations in light of the Board’s prohibition of the use of that method.
By early 2001, the Board had made decisions on several key issues, including (a) the method of accounting for mergers and acquisitions by a not-for-profit organization and (b) the criteria to be used to identify the acquiring not-for-profit organization. Deliberations on this project were temporarily suspended in early 2001 while the Board completed its work on Statements 141 and 142. After the issuance of those statements, the Board resumed deliberations of the issues remaining in this project.
