On January 12, 2017, the Financial Accounting Standards Board (FASB) issued ASU No. 2017-02, Not-for-Profit Entities—Consolidation (Subtopic 958-810): Clarifying When a Not-for-Profit Entity That Is a General Partner or a Limited Partner Should Consolidate a For-Profit Limited Partnership or Similar Entity.
Current generally accepted accounting principles require an NFP (not-for-profit entity) that is a general partner of a for-profit limited partnership to apply the consolidation guidance in Subtopic 810-20, Consolidation—Control of Partnerships and Similar Entities. ASU No. 2015-02 superseded the guidance in Subtopic 810-20 and added new guidance for limited partnerships, but not for general partnerships. As a result, once ASU No. 2015-02 becomes effective, the guidance in Subtopic 810-20 will no longer exist, and an NFP that is a general partner of a for-profit limited partnership will be required to apply the general consolidation guidance in Subtopic 810-10.
ASU 2017-02 maintains how NFP general partners currently apply the consolidation guidance in Subtopic 810-20 by including that guidance within Subtopic 958-810. ASU No. 2017-02 also adds to Subtopic 958-810 the general guidance in Subtopic 810-10 on when NFP limited partners should consolidate a limited partnership.
The amendments in this update are effective for NFPs for fiscal years beginning after December 15, 2016. The standard will become testable on the CPA exam October 2017.
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Valerie Wendt is Vice President of Product Development & Customer Experience for Surgent CPA Review. Valerie is a graduate of Saint Leo University in Saint Leo, Florida and holds a Project Management Certificate from Villanova University. Before joining Surgent, Valerie was Senior Product Manager for Thomson Reuters overseeing their CPA Review and CPE business lines.