Mergers and Acquisitions by a Not-for-Profit Organization (including amendments to Statement 142)
Last Updated: May 27, 2009 (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.
The objective of the Statement is to improve the relevance, completeness, and comparability of financial information with regard to not-for-profit mergers and acquisitions. In addition, the Statement provides guidance that assists not-for-profit entities in the application of FASB Statement No. 142, Goodwill and Other Intangible Assets, and FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements.
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(revised 2007), 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
This project was completed on May 22, 2009, with the issuance of FASB Statement No. 164, Not-for-Profit Entities: Mergers and Acquisitions. The Statement and the related news release are posted on the FASB’s website.
On May 9, 2008, the FASB and its Staff issued a request for additional comments regarding a potential revision to the October 2006 proposed Statement, Not-for-Profit Organizations: Mergers and Acquisitions, and for field visit volunteers. The comment letter period ended July 8, 2008. The comment letters, which are part of the project’s public record, are posted to the FASB’s website.
On October 9, 2006, the Board issued two Exposure Drafts. The comment period for the two Exposure Drafts ended on January 29, 2007. The comment letters, which are part of the project’s public record, are posted to the FASB’s website.
In December 2007, the Board completed its project on business combinations for business enterprises and issued two Standards:
- Business Combinations (Statement 141(R))
- Consolidated Financial Statements, Including Accounting and Reporting of Noncontrolling Interests (Statement 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.
*Summary of Decisions Reached to Date
See Statement 164.
With the issuance of Statement 164, the Board completed its project on combinations of not-for-profit entities. The FASB staff is currently planning to hold a webcast regarding the recent issuance of Statement 164 and other topics.
Board/Other Public Meeting Dates
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, Interpretation, FSP, or Statement 133 Implementation Issue.
Below is a list of the Board meetings from 2002 through 2009. Minutes for meetings generally are posted within two weeks following the meeting.
|February 26, 2009||Board Meeting—Mergers and Acquisitions & Goodwill and Other Intangible Assets: Resolution of issues that arose during drafting of the preballot draft, including consideration of comments made by external reviewers.|
|November 12, 2008||Board Meeting—Mergers and Acquisitions & Goodwill and Other Intangible Assets: Resolution of the final issues associated with the not-for-profit business combination guidance.|
|October 8, 2008||Board Meeting—Mergers and Acquisitions: Continued discussion of whether to retain or modify the proposed requirements for (a) initial recognition and measurement of acquisitions by not-for-profit organizations and (b) subsequent accounting for any goodwill recognized as a result of an acquisition.|
|September 24, 2008||Board Meeting—Mergers and Acquisitions & Goodwill and Other Intangible Assets: Discussion of (1)whether to require a different method of accounting for a merger of not-for-profit organizations than that required for an acquisition and, if so, how to define a merger and clarify the proposed guidance, (2) the net asset approach to initial recognition and measurement of acquisitions, and (3) the subsequent accounting for any goodwill recognized|
|September 18, 2008||Board Meeting—Mergers and Acquisitions: Discussion of issues raised by comment letter respondents and field visit participants|
|June 11, 2008||Board Meeting—Intangible Assets|
|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|
In November 1999, the Board affirmed its earlier decision to undertake a project on mergers and acquisitions by a not-for-profit organization as a separate phase of 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 No. 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 according to the guidance in APB Opinions No. 16, Business Combinations, and No. 17, Intangible Assets, until this project is completed and a final Statement becomes effective.
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.
- The Board needs to provide guidance 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 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.
Ronald J. Bossio
Senior Project Manager