A proposed Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB) on Aug. 4 clarifies when a not-for-profit entity that is a general partner should consolidate a for-profit limited partnership or similar legal entity.
The proposal would retain the consolidation guidance that was in Subtopic 810-20 for not-for-profits by including it within Subtopic 958-810.
The proposed guidance would be followed once the amendments in ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, go into effect.
“Current GAAP requires a not-for-profit that is a general partner of a for-profit limited partnership to apply the consolidation guidance in Subtopic 810-20, unless that partnership interest is reported at fair value in conformity with certain other guidance,” the proposal states. “However, once the amendments in Update 2015-02 are effective, the guidance in Subtopic 810-20 no longer will exist, creating uncertainty about when a not-for-profit that is a general partner should consolidate a for-profit limited partnership. The amendments in this proposed Update would retain the consolidation guidance that existed in Subtopic 810-20 by including it within Subtopic 958-810.”
The proposed amendments would be an improvement to US GAAP because they would clarify the consolidation guidance for not-for-profits to help avoid diversity in practice,” the FASB says.
Comments on the proposed ASU are due by Oct. 3. The exposure draft contains instructions on how to submit comments to the FASB.