Consolidation of a Not-for-Profit Entity By a For-Profit


The objective of this project was to develop consolidation guidance to determine whether a for-profit sponsor should consolidate a not-for-profit entity.


In May 2020, the Board received an agenda request asking it to provide guidance on how a for-profit sponsor should evaluate whether it consolidates a not-for-profit entity that it controls through sole corporate membership, ownership of a majority voting interest, or other means, but for tax reasons the for-profit sponsor does not have a claim on assets transferred to the not-for-profit entity. The Codification does not provide specific guidance on this issue. Therefore, entities analogize either to proposed consolidation guidance that was not finalized by the Board or to aspects of Subtopic 958-810, Not-For-Profit Entities—Consolidation. Those analogies lead to diversity in the consolidation determination.

In October 2020, the Board decided to add a narrow-scope project to its technical agenda to develop specific guidance in Topic 810, Consolidation, for the fact pattern above and directed the staff to focus on non-consolidation alternatives.

Final Update:

In March 2021, in determining whether a for-profit entity should consolidate a not-for-profit entity (NFP) that it sponsors, the Board observed that for-profit entities, as an accounting policy election, often analogize to Topic 810, Consolidation, or Subtopic 958-810, Not-for-Profit Entities—Consolidation, or refer to nonauthoritative guidance. The staff’s research revealed that for-profit sponsors predominantly do not consolidate such NFPs. The project was added in part because there was a view that there was diversity in practice in making the consolidation determination.  However, the additional research performed by the staff after the Board’s initial agenda decision showed that consolidation of an NFP by a for-profit sponsor is not sufficiently pervasive to amend GAAP. Therefore, the Board removed the project from its technical agenda.

For those for-profit entities that are consolidating an NFP, some Board members stated that the for-profit entity could consider a voluntary change in accounting policy that would result in deconsolidation.