FASB Combinations Between Mutual Entities

FASB: Combinations Between Mutual Entities

Project Updates

Combinations Between Mutual Entities

Project Summary

Last Updated: August 7, 2007 (Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

*Immediate Plans
*Summary of Tentative Decisions
*Board Meetings and Other Public Meeting Dates
History and Background
*Frequently Asked Questions
Contact Information


The objective of this project is to develop guidance on the accounting for combinations between two or more mutual entities. This project uses a "differences-based" approach that presumes that the provisions of FASB Statement No. 141, Business Combinations, and FASB Statement No. 142, Goodwill and Other Intangible Assets, and the decisions in the Business Combinations: Applying the Acquisition Method project apply to combinations between mutual entities unless conditions of the combination are found to be so different as to warrant a different accounting treatment. The most notable of those differences identified are the lack of equity investors (in the traditional sense) and the lack of a readily identifiable and measurable monetary consideration.


*The financial reporting requirements for combinations between mutual entities will be included in the forthcoming final FASB Statement on business combinations.  The Board expects to issue that final Statement in the third quarter of 2007.

*Based on the Board’s decisions to date, the following is a summary of the anticipated transition and effective date requirements for that forthcoming final Statement. Those requirements would apply to all for-profit business entities, including mutual entities.


  • The final Statement should be applied prospectively to business combinations for which the acquisition date is on or after the effective date.

  • Retrospective application to acquisitions completed before the Statement is applied should not be permitted.

  • The Statement should be applied at the same time the final noncontrolling interests Statement is applied (if applicable).

Effective Date (last discussed by the FASB on April 18, 2007)

  • The final Statement should be effective for annual periods beginning on or after December 15, 2008.

  • An entity would be prohibited from adopting the Statement before their effective date.

Refer to the Business Combinations: Applying the Acquisition Method project for additional information.

Other Activity

On April 13, 2005, FASB Chairman Robert H. Herz testified before the Financial Institutions and Consumer Credit Subcommittee of the Committee of Financial Services on H.R. 1042, the "Net Worth Amendment for Credit Unions Act". View his testimony.


*The decisions reached for combinations between mutual entities were included as part of a comprehensive Exposure Draft, Business Combinations (June 2005). That Exposure Draft was issued for public comment and the FASB and IASB (the Boards) have considered the comments received and completed their redeliberations.

Refer to the Business Combinations: Applying the Acquisition Method project for additional information and for copies of the Exposure Draft.


Refer to the project update for Business Combinations: Applying the Acquisition Method for a list of Board meetings that occurred after the issuance of the June 2005 business combinations Exposure Draft.

Below is a list of the FASB Board meetings for this project that occurred prior to the issuance of that Exposure Draft. Minutes for meetings beginning with those of the March 17, 2003 meeting are available on the FASB website. Minutes are generally posted within two weeks following the meeting.

January 27, 2004 Liaison Meeting—To discuss how the Board’s decisions on the Combinations Between Mutual Entities and the Liabilities and Equity projects would impact mutual entities.
December 17, 2003 Board Meeting—Enterprise Measurement, Goodwill for Mutual Entities, Transitional Provisions for Mutual Entities, Credit Union Core Deposit Intangible Assets, Additional Disclosure for Business Combinations, and Follow-up on Definition of a Business
March 17, 2003 Board Meeting—Issues surrounding the methods used for estimating the fair value of an acquired mutual entity
September 4, 2002 Board Meeting—Accounting for the fair value of the acquired mutual entity in the acquiring mutual entity’s financial statements, disclosure, transition, and disposition of Statement 72 and Interpretation 9 insofar as they relate to a combination between mutual entities.
May 8, 2002 Board Meeting—Initial measurement of the acquisition cost of an acquired mutual entity
January 23, 2002 Board Meeting—Identifying the acquiring mutual entity, recognizing identifiable intangible assets
December 19, 2001 Board Meeting—Use of purchase method to account for combinations between mutual entities
October 29, 2001 Roundtable Discussion—Mutual entities


The effective dates of Statements 141 and 142 were deferred for combinations between two or more mutual entities to allow the Board time to consider whether there are any unique attributes of mutual entities to justify an accounting treatment different from that provided in those Statements. That means that mutual entities will continue to account for business combinations 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 on combinations of mutual entities is issued and effective.

The following were among the reasons why the Board decided to undertake this separate project.

  • There is diversity in current practice. Some combinations between mutual entities have characteristics that distinguish them from other business combinations. For example, some combinations 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 combinations of mutual entities, 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 proposed elimination of the pooling-of-interests method. Statement 141 eliminated the pooling-of-interests method (pooling method). In practice today, many combinations of mutual entities are accounted for in a manner similar to the pooling method. This project is needed to provide guidance to mutual entities in light of the Board’s prohibition of the use of that method.

Deliberations on this project were deferred until the Board completed its work on Statements 141 and 142. With the issuance of those Statements, the Board commenced deliberations of the issues in this project, reaching the tentative decisions described above.


  1. What is a Mutual Entity?

    A mutual entity is an entity other than an investor-owned entity that provides dividends, lower costs, or other economic benefits directly and proportionately to its owners, members, or participants. Mutual insurance companies, credit unions, and farm and rural electric cooperatives are examples of mutual entities (FASB Concepts Statement No. 4, Objectives of Financial Reporting by Nonbusiness Organizations, paragraph 7).

  2. Is Statement 141 applicable to the combination of two mutual entities? If not, what guidance should be applied?

    *Paragraph 60 of Statement 141 states that Statement 141 is not effective for combinations between two or more mutual enterprises until interpretive guidance is issued. As of this time that guidance has not been issued. Therefore, APB Opinion 16 and related interpretative guidance (including, but not limited to, FASB Interpretations of Opinion 16 and AICPA Audit and Accounting Guides) should continue to be applied until further guidance is issued and effective. Refer to the immediate plans section for information about the expected issuance and effective date of the forthcoming final Statement on business combinations.

Contact Information

Alicia Posta
Project Manager