In January of 2017, FASB issued Accounting Standards Update No. 2017-02 Not-for-Profit Entities – Consolidation. The update is to clarify when a nonprofit entity that is a general partner or a limited partner should consolidate a for-profit limited partnership or similar entity. The update is intended to improve GAAP by clarifying the consolidation guidance for nonprofits to help avoid diversity in practice.
Nonprofits that are general partners are presumed to control a for-profit limited partnership, regardless of the extent of their ownership interest, unless that presumption is overcome. The presumption is overcome if the limited partners have either substantive kick-out rights or substantive participating rights.
Nonprofits with fiscal years beginning after December 15, 2016. Early adoption is permitted.
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