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Merger of Not-for-Profit Entities

958-805-25-3 The {Glossary link} not-for-profit entity {Glossary link} (NFP) resulting from a merger (the new entity) shall account for the merger by applying the carryover method described in the Merger of Not-for-Profit Entities Subsections of this Subtopic. [FAS 164, paragraph 6, sequence 6]

958-805-25-4 Applying the carryover method requires combining the assets and liabilities recognized in the separate financial statements of the merging entities as of the merger date (or that would be recognized if the entities issued financial statements as of that date), adjusted as necessary in accordance with paragraph 958-805-25-7 and paragraphs 958-805-30-2 through 30-4. [FAS 164, paragraph 7, sequence 7.1]

958-805-25-5 The remainder of the discussion of the carryover method refers to financial statements of the merging entities, rather than a more precise, but longer, phrase such as assets and liabilities that would be recognized in the financial statements of the merging entities if statements are prepared. Use of the shorter phrase is not intended to exclude, for example, an NFP that has not prepared or issued financial statements. In that situation, the phrase refers to the items in the entity’s financial records that would be the basis for preparing financial statements. [FAS 164, paragraph 7 FN2, Sequence 7.1.1]

958-805-25-6 The new NFP shall recognize in its financial statements the assets and liabilities reported in the separate financial statements of the merging entities as of the merger date in accordance with generally accepted accounting principles (GAAP). [FAS 164, paragraph 8, sequence 8]

958-805-25-7 The new NFP does not recognize additional assets or liabilities, such as internally developed intangible assets, that GAAP did not require or permit the merging entities to recognize. However, if a merging entity’s separate financial statements are not prepared in accordance with GAAP, those statements shall be adjusted to GAAP before the new entity recognizes the assets and liabilities. [FAS 164, paragraph 9, sequence 9]

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    Classifying or Designating Assets and Liabilities in a Merger

958-805-25-8 The new NFP shall carry forward at the merger date the merging entities’ classifications and designations of their assets and liabilities unless one of the exceptions in the following paragraph applies. [FAS 164, paragraph 10, sequence 10]

958-805-25-9 In some situations, GAAP provides for different accounting depending on how an entity classifies or designates a particular asset or liability. Paragraphs 805-20-25-7 through 25-8 provide examples of such classifications and designations. The new NFP shall carry forward into the opening balances in its financial statements (see paragraph 958-805-45-2(a)) the merging entities’


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