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Excerpt from ASC 958-810-20
Control: The direct or indirect ability to determine the direction of management and policies through ownership, contract, or otherwise.
Relationship
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Requirement
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Additional guidance
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Reporting NFP is the sole corporate member of another NFP
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Consolidate unless control does not rest with the sole corporate member.
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If the sole corporate member does not have control, consolidation is prohibited. See NP 5.2.1.2.
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Reporting NFP owns, directly or indirectly, a majority voting interest in an NFP
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Consolidate unless control does not rest with the majority owner.
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If the majority owner does not have control, consolidation is prohibited. See NP 5.2.1.2.
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Reporting NFP controls another NFP through having a majority voting interest in its board and has an economic interest in the other NFP
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Consolidate unless control does not rest with the holder of the majority voting interest.
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If majority voting interest holder does not have control, consolidation is prohibited. See NP 5.2.1.3.
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Reporting NFP controls another NFP through means other than sole corporate membership or majority voting interest (e.g., through contract or affiliation agreement) and has an economic interest in the other NFP
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If consolidation would be meaningful, it is permitted but not required.
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If consolidated statements are not presented, notes to the financial statements should disclose
(a) the identification of the other entity and the nature of its relationship with the reporting entity,
(b) summarized financial data of the other entity, and
(c) the related party disclosures required by ASC 850‑10‑50.
See ASC 958-810-25-4 and ASC 958-810-50-2.
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Reporting NFP has control over another NFP or an economic interest in another NFP, but not both
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Consolidation is prohibited.
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Notes to the financial statements should provide the related party disclosures required by ASC 850-10-50. See ASC 958-810-25-5 and ASC 958-810-50-3.
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In the case of control of a related but separate NFP through a majority voting interest in the board of the other NFP by means other than ownership or sole corporate membership and an economic interest in that other NFP, consolidation is required, unless control does not rest with the holder of the majority voting interest, in which case consolidation is prohibited. An NFP has a majority voting interest in the board of another entity if it has the direct or indirect ability to appoint individuals that together constitute a majority of the votes of the fully constituted board (that is, including any vacant board positions). Those individuals are not limited to the NFP’s own board members, employees, or officers. For implementation guidance on a majority voting interest in the board of another entity, see paragraph 958-810-55-5.
A majority voting interest in the board of another entity… is illustrated by the following example. Entity B has a five-member board, and a simple voting majority is required to approve board actions. Entity A will have a majority voting interest in the board of Entity B if Entity A has the ability to appoint three or more of Entity B’s board members. If three of Entity A’s board members, employees, or officers serve on the board of Entity B but Entity A does not have the ability to require that those members serve on the Entity B board, Entity A does not have a majority voting interest in the board of Entity B.
Excerpt from ASC 958-810-20
Economic interest: A not-for-profit entity’s (NFP’s) interest in another entity that exists if any of the following criteria are met:
The following are examples of economic interests:
Situation
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Requirements
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Reference
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NFP sponsors and provides funding for a research and development arrangement
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Apply guidance in ASC 810-30, Research and development arrangements
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Contractual management relationship with a for-profit entity
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Apply guidance in the “Consolidation of Entities Controlled by Contract” subsections of ASC 810-10-25 and ASC 810-10-55 to determine whether the arrangement conveys a controlling financial interest. Contractual management relationships with NFP entities would be evaluated under the framework discussed in NP 5.2.1 for relationships with NFP entities.
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Excerpt from ASC 810-10-45-23
Changes in a parent’s ownership interest in a subsidiary while the parent retains its controlling financial interest in its subsidiary shall be accounted for as equity transactions (investments by owners and distributions to owners acting in their capacity as owners). Therefore, no gain or loss shall be recognized in consolidated net income or comprehensive income. The carrying amount of the noncontrolling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted shall be recognized in equity attributable to the parent.
When consolidated financial statements are required or permitted by Section 958-810-25, a noncontrolling interest shall be provided if such interest is represented by an economic interest whereby the noncontrolling interest would share in the operating results or residual interest upon dissolution.
An interest by an NFP in another NFP may be less than a complete interest. For example, an NFP may appoint 80 percent of the board of the other NFP. For NFPs other than those within the scope of Topic 954, if the conditions for consolidation in paragraphs 958-810-25-2, 958-810-25-3, or 958-810-25-4 are met, the basis of that consolidation would not reflect a noncontrolling interest for the portion of the board that the reporting entity does not control, because there is no ownership interest other than the interest of the reporting entity.
Net assets
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|||
Without donor restrictions
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With donor restrictions
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Total
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Parent
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$3,000
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$800
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$3,800
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Subsidiary
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600
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--
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600
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$3,600
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$800
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$4,400
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Net assets
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|||
Without donor restrictions
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With donor restrictions
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Total
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Consolidated
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$3,100
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$1,300
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$4,400
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PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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