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Fund raising—net revenue sharing ratio

65%

35%

Information technology and marketing provided by Charity C

receives nominal fee, pays all costs

pays nominal fee

Financial—years ended 20X5 and 20X4: Revenues Expenses Net excess (deficit)

Net assets—carrying amount Employee head count Joint operating agreements:

Governance: Members of board of directors Members of executive committee

Staffing of Entity E: Senior officers of Entity E:

President

Vice president strategic relations

Chief financial officer

VP public policy (vacant, being recruited)

80 20

former chief executive officer

former chief financial officer

50 16

former chief executive officer

$

$

Charity D $ millions

70

67

119

120

Charity C $ millions

45 $

46

42

42

30 37

(7) 13 90

$

3

4

37 38 (1)

20 90

[FAS 164, paragraph A23, sequence 124.2]

958-805-55-26 Some factors in this Example might suggest that the combination is a merger. For example, the evidence indicates that each charity participated in the process leading to the combination. That is, their governing boards both a p p r o v e d t h e f o r m a t i o n o f t h e s t r a t e g y c o m m i t t e e , b o t h w e r e r e p r e s e n t e d o n t h a t

committee,

and

both

had

the

opportunity

to

accept

or

reject

the

recommendations of the committee. In addition, the legal dissolution of both charities to form Charity E resulted in a new NFP with a newly formed governing body, to which the governing boards of both charities ceded control of their operations and net assets, at least in legal form. [FAS 164, paragraph A24, sequence 125]

958-805-55-27 However, other factors indicate that one charity acquired the other, that is, that the governing board of the financially stronger and larger Charity C dominated the terms of the combination and did not, in substance, cede control of its operations and net assets to the governing board of Charity E. Those factors include the following: [FAS 164, paragraph A25, sequence

    • 126.1

      ]

      • a.

        Charity C’s dominance in the selection of 15 of the 20 members of the initial board of directors of Charity E. It also seems that the governing power center of Charity C—its executive committee—continues to control because 13 of its members continued as members of the initial 20-member board of Charity E and, together with the other 2 board members from that charity, would have a strong (if not dominating)

35

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