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958-805-55-31 Despite the process and legal form used, the economic substance of the transaction is judged to be one in which the central governing power residing in the executive committee of Charity C was not surrendered; that is, the governing body of Charity C did not cede control of the entity to the governing body of Charity E. The transaction is an acquisition in which the economic substance and existence of Charity C (the acquirer) continues, although with a different name and expanded operations. [FAS 164, paragraph A28, sequence 129]

Merger of Not-for-Profit Entities

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      > Example 1: Disclosures for a Merger

958-805-55-32 This Example illustrates some of the disclosures required for a merger of not-for-profit entities in paragraphs 958-805-50-1 through 50-6. The Example assumes that three not-for-profit entities (NFPs) merge to create a new NFP. NFP F, NFP G, and NFP H merge to create NFP I, which is a public entity. [FAS 164, paragraph A29, sequence 130.1.1]

958-805-55-33 Although this Example presents the illustrative notes separately, NFP I might present the disclosures illustrated in a single note. The required supplemental information is presented in a separate schedule outside the notes. [FAS 164, paragraph A29, sequence 130.1.2] This Example illustrates the following disclosures:

    • a.

      Description of the merger

    • b.

      Significant asset not required to be recognized

    • c.

      Conforming accounting policies

    • d.

      Major classes of assets, liabilities, and net assets

    • e.

      Required supplemental information.

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    > > Description of the Merger

958-805-55-34 The following note illustrates the disclosures required by paragraph 958-805-50-2(a) through (c).

NFP I was formed on June 15, 20X1, as the result of a merger of three local not-for-profit entities—NFP F, NFP G, and NFP H. All three entities shared the common mission of supporting youth education. Through their merger, the entities seek to further their common mission by substantially improving their after-school youth programs in the region and their capability to assist youth in need. They also seek to achieve economies of scale and other synergies through integrating their services. [FAS 164, paragraph A29, sequence 130.2.1]


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