On August 3, the FASB released a proposed Accounting Standards Update (ASU), to among other things, reinstate the requirement relating to consolidation of a for-profit limited partnership by the not-for-profit (NFP) general partner, which was removed in FASB ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This arrangement is common among those NFPs who work in the affordable housing area.
In addition to addressing the consolidation issue, the proposed ASU includes a technical correction on another matter for NFPs, for the portfolio-wide fair value alternative in Subtopic 958-325 that applies to all NFPs, other than healthcare NFPs. FASB ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities effective in 2019, correctly removed the ability of an NFP to carry investments in the form of partnership or venture capital interests or nonmarketable equity securities at cost. This is consistent with the ASU’s requirement to carry all such equity investments, other than those involving significant influence or a controlling financial interest, at fair value. However, in striking out those items from the scope of Subtopic 958-325, the ASU also eliminates the ability of such NFPs to carry such investments over when they have significant influence or a controlling financial interest at fair value under this portfolio-wide alternative, rather than using the equity method or consolidating, respectively. This proposed ASU contains the necessary corrections to address this issue and is referenced in the FASB's proposal in its "Summary and Basis for Conclusions" section.
The FASB is seeking comments by October 3, 2016.
To view the FASB's exposure documents, visit the FASB website (www.fasb.org).
Click here to download the Exposure Draft.
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