Improving the accounting and disclosures for mergers and acquisitions by non-profit organizations is the aim of two exposure drafts released by the Financial Accounting Standards Board.
The first proposal, “Not-for-Profit Organizations: Mergers and Acquisitions,” would eliminate the use of the pooling-of-interests method of accounting by not-for-profit organizations. The method allows assets acquired and liabilities assumed to be recorded at "carryover" amounts recorded on the books of acquired organizations. The proposed change would instead require the application of the acquisition method to all mergers and acquisitions by a nonprofit.
The second exposure draft, “Not-for-Profit Organizations: Goodwill and Other Intangible Assets Acquired in a Merger or Acquisition,” proposes guidance for intangible assets after a merger or acquisition. The proposed guidance is consistent with the accounting for all other acquired intangible assets -- whether purchased or donated, or whether acquired individually, or as part of a group.
In releasing the drafts, the board noted that recent studies estimate that in the United States, the number of not-for-profit entities reporting financial results grew by 68 percent between 1993 and 2003, representing approximately 9 percent of the country’s gross domestic product.
Copies of the proposals can be downloaded from the FASB Web site, at
FASB Looks at M&A Accounting for Nonprofits
Published October 10, 2006, 11:00 p.m. EDT
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