Proposal Clarifies NFP Consolidation Guidance
Author: Anne Coughlan
On August 3, 2016, the Financial Accounting Standards Board (FASB) issued an exposure draft affirming current practice for not-for-profit (NFP) entities applying consolidation accounting to for-profit limited partnerships. Situations in which an NFP serves as a general partner most commonly occur in investments in a qualified affordable housing project established as a limited partnership. Comments are requested by October 3, 2016.
The need for clarification arose from the issuance of the Accounting Standards Update (ASU) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, that made targeted changes to consolidation guidance; however, the ASU moved or eliminated portions of the guidance NFPs would normally reference, causing confusion on how to analyze consolidation decisions.
The proposal updates the language in Subtopic 958-810, Not-for-Profit Entities—Consolidation, to clarify that an NFP entity that’s a general partner would be presumed to control a limited partnership, unless the limited partners are able to exercise substantive kick-out or participating rights.
Given ASU 2015-02 is effective for fiscal years beginning after December 15, 2016, FASB is expected to finalize this proposal before year-end.