# ASC 805-958-25: Business Combinations — Not-for-Profit Entities — 25 Recognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/805/958/#25-recognition)

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## ASC 805-958-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/805/958/#25-recognition)

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##### [805-958-25-1](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-1)

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A [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) shall determine whether a transaction or other event is a [merger of not-for-profit entities](https://asc.understandingaccounting.org/glossary/m/#merger-of-not-for-profit-entities "A transaction or other event in which the governing bodies of two or more not-for-profit entities cede control of those entities to create a new not-for-profit entity.") or an [acquisition by a not-for-profit entity](https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity "A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities.") by applying the definitions.

##### [805-958-25-2](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-2)

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Paragraphs

[958-805-55-1 through 55-31](https://asc.understandingaccounting.org/asc/805/958/#805-958-55-1)

provide guidance on distinguishing between a merger and an acquisition.

### Merger of Not-for-Profit Entities

##### [805-958-25-3](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-3)

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The [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (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.

##### [805-958-25-4](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-4)

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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](https://asc.understandingaccounting.org/glossary/m/#merger-date "The date on which the merger becomes effective.") (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](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-7) and paragraphs

[958-805-30-2 through 30-4](https://asc.understandingaccounting.org/asc/805/958/#805-958-30-2)

.

##### [805-958-25-5](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-5)

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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.

##### [805-958-25-6](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-6)

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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).

##### [805-958-25-7](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-7)

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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.

#### Classifying or Designating Assets and Liabilities in a Merger

##### [805-958-25-8](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-8)

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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.

##### [805-958-25-9](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-9)

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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](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-7)

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)](https://asc.understandingaccounting.org/asc/805/958/#805-958-45-2)) the merging entities' classifications and designations unless either of the following situations applies:

1.  a
    
    The merger results in a modification of a contract in a manner that would change those previous classifications or designations; for example, if the provisions of a lease are modified and the modification is not accounted for as a separate contract in accordance with paragraph [842-10-25-8](https://asc.understandingaccounting.org/asc/842/10/#842-10-25-8)
    
2.  b
    
    Reclassifications are necessary to conform accounting policies in accordance with paragraph [958-805-30-2](https://asc.understandingaccounting.org/asc/805/958/#805-958-30-2).

##### [805-958-25-10](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-10)

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In situation (a) in the preceding paragraph, the new NFP shall classify or designate the asset or liability on the basis of the contractual terms, economic conditions, its operating or accounting policies, and other pertinent conditions as they exist at the date of that modification. In situation (b) in the preceding paragraph, the new NFP shall classify or designate the asset or liability on the basis of the conformed accounting policies at the merger date.

##### [805-958-25-11](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-11)

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At the merger date, the new NFP may contemplate renegotiating and modifying leases of the business or nonprofit activity acquired. Modifications made after the merger date, including those that were planned at the time of the combination, are postcombination events that should be accounted for separately by the new NFP in accordance with Topic 842.

### Acquisition by a Not-for-Profit Entity

##### [805-958-25-12](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-12)

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A [not-for-profit entity](https://asc.understandingaccounting.org/glossary/n/#not-for-profit-entity "An entity that possesses the following characteristics, in varying degrees, that distinguish it from a business entity: Contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return Operating purposes other than to provide goods or services at a profit Absence of ownership interests like those of business entities. Entities that clearly fall outside this definition include the following: All investor-owned entities Entities that provide dividends, lower costs, or other economic benefits directly and proportionately to their owners, members, or participants, such as mutual insurance entities, credit unions, farm and rural electric cooperatives, and employee benefit plans.") (NFP) shall account for each acquisition of a [business](https://asc.understandingaccounting.org/glossary/b/#business "Paragraphs 805-10-55-3A805-10-55-4805-10-55-5805-10-55-6 and 805-10-55-8805-10-55-9 define what is considered a business.") or [nonprofit activity](https://asc.understandingaccounting.org/glossary/n/#nonprofit-activity "An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing benefits, other than goods or services at a profit or profit equivalent, as a fulfillment of an entity's purpose or mission (for example, goods or services to beneficiaries, customers, or members). As with a not-for-profit entity, a nonprofit activity possesses characteristics that distinguish it from a business or a for-profit business entity.") by applying the acquisition method described in the Acquisition by a Not-for-Profit Entity Subsections of this Subtopic.

##### [805-958-25-13](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-13)

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The acquisition method in the Acquisition by a Not-for-Profit Entity Subsections is the same as the acquisition method described in Topic 805. However, these Subsections include guidance on aspects of the following items that are unique or especially significant to an NFP:

1.  a
    
    Identifying the [acquirer](https://asc.understandingaccounting.org/glossary/a/#acquirer "The entity that obtains control of the acquiree. However, in a business combination in which a variable interest entity (VIE) is acquired, the primary beneficiary of that entity always is the acquirer. (P) December 16, 2026; (N) December 16, 2026805-10-65-5The entity that obtains control of the acquiree.See paragraphs 805-10-25-4805-10-25-5 for guidance on determining the acquirer.")
    
2.  b
    
    Identifying the [acquisition date](https://asc.understandingaccounting.org/glossary/a/#acquisition-date "The date on which the acquirer obtains control of the acquiree.")
    
3.  c
    
    Recognizing the [identifiable](https://asc.understandingaccounting.org/glossary/i/#identifiable "An asset is identifiable if it meets either of the following criteria: It is separable, that is, capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset, or liability, regardless of whether the entity intends to do so. It arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.") assets acquired, the liabilities assumed, and any [noncontrolling interest](https://asc.understandingaccounting.org/glossary/n/#noncontrolling-interest "The portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A noncontrolling interest is sometimes called a minority interest.") in the [acquiree](https://asc.understandingaccounting.org/glossary/a/#acquiree "The business or businesses that the acquirer obtains control of in a business combination. This term also includes a nonprofit activity or business that a not-for-profit acquirer obtains control of in an acquisition by a not-for-profit entity.")
    
4.  d
    
    Recognizing [goodwill](https://asc.understandingaccounting.org/glossary/g/#goodwill "An asset representing the future economic benefits arising from other assets acquired in a business combination, acquired in an acquisition by a not-for-profit entity, or recognized by a joint venture upon formation that are not individually identified and separately recognized. For ease of reference, this term also includes the immediate charge recognized by not-for-profit entities in accordance with paragraph 958-805-25-29.") acquired or a [contribution](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") received, including consideration transferred
    
5.  e
    
    Determining what is part of the acquisition transaction.

##### [805-958-25-14](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-14)

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Differences in the application of the acquisition method by a NFP acquirer from the application of the acquisition method by a business entity include all of the following:

1.  a
    
    The identification of the acquirer in accordance with paragraphs
    
    [958-805-25-15 through 25-16](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-15)
    
    , instead of the guidance in paragraph [805-10-25-5](https://asc.understandingaccounting.org/asc/805/10/#805-10-25-5)
    
2.  b
    
    The recognition and measurement of goodwill (or the immediate charge to the statement of activities) in accordance with paragraphs
    
    [958-805-25-27 through 25-30](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-27)
    
    , instead of the guidance in paragraph [805-30-25-1](https://asc.understandingaccounting.org/asc/805/30/#805-30-25-1) and paragraphs
    
    [805-30-30-1 through 30-3](https://asc.understandingaccounting.org/asc/805/30/#805-30-30-1)
    
3.  c
    
    The recognition and measurement of an [inherent contribution](https://asc.understandingaccounting.org/glossary/i/#inherent-contribution "A contribution that results if an entity voluntarily transfers assets (or net assets) or performs services for another entity in exchange for either no assets or for assets of substantially lower value and unstated rights or privileges of a commensurate value are not involved.") received in accordance with paragraph [958-805-25-31](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-31) and paragraphs
    
    [958-805-30-8 through 30-9](https://asc.understandingaccounting.org/asc/805/958/#805-958-30-8)
    
    , instead of the guidance for a gain from a bargain purchase in paragraphs
    
    [805-30-25-2 through 25-4](https://asc.understandingaccounting.org/asc/805/30/#805-30-25-2)
    
    and paragraphs
    
    [805-30-30-4 through 30-6](https://asc.understandingaccounting.org/asc/805/30/#805-30-30-4)
    
    .

#### Identifying the Acquirer

##### [805-958-25-15](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-15)

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Paragraph [805-10-25-4](https://asc.understandingaccounting.org/asc/805/10/#805-10-25-4) requires that one of the combining entities be identified as the acquirer. Instead of applying the guidance in paragraph [805-10-25-5](https://asc.understandingaccounting.org/asc/805/10/#805-10-25-5), the following guidance on control and consolidation of NFPs shall be used to identify the acquirer:

1.  a
    
    For an NFP acquirer other than a health care entity within the scope of Topic 954, the guidance in Subtopic 958-810, including the guidance referenced in paragraph [958-810-15-4](https://asc.understandingaccounting.org/asc/810/958/#810-958-15-4).
    
2.  b
    
    For a not-for-profit health care acquirer within the scope of Topic 954 (see Section 954-10-15), the guidance referenced in paragraph [954-810-15-3](https://asc.understandingaccounting.org/asc/810/954/#810-954-15-3).
    
3.  c
    
    Control of a for-profit business has the meaning of controlling financial interest in paragraphs [810-10-15-8 through 15-8A](https://asc.understandingaccounting.org/asc/810/10/#810-10-15-8).
    
4.  d
    
    Control of a not-for-profit entity has the meaning of [control](https://asc.understandingaccounting.org/glossary/c/#control "The direct or indirect ability to determine the direction of management and policies through ownership, contract, or otherwise.") used in Subtopic 954-810 and Subtopic 958-810.

##### [805-958-25-16](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-16)

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If an [acquisition by a not-for-profit entity](https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity "A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities.") has occurred but applying the guidance in the previous paragraph does not clearly indicate which of the combining entities is the acquirer, the factors in paragraphs

[958-805-55-42 through 55-46](https://asc.understandingaccounting.org/asc/805/958/#805-958-55-42)

shall be considered in making that determination.

#### Identifying the Acquisition Date

##### [805-958-25-17](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-17)

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Paragraphs

[805-10-25-6 through 25-7](https://asc.understandingaccounting.org/asc/805/10/#805-10-25-6)

require identifying the [acquisition date](https://asc.understandingaccounting.org/glossary/a/#acquisition-date "The date on which the acquirer obtains control of the acquiree.") and provide guidance for doing so. In addition to that guidance, the date on which an NFP acquirer obtains [control of an NFP](https://asc.understandingaccounting.org/glossary/c/#control-of-a-not-for-profit-entity "See Control.") with sole corporate membership generally also is the date on which the acquirer becomes the sole corporate member of that entity.

#### Recognizing the Identifiable Assets Acquired, the Liabilities Assumed, and Any Noncontrolling Interest in the Acquiree

##### [805-958-25-18](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-18)

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


This Subsection includes the following guidance that is incremental to Subtopic 805-20 for the recognition of identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree:

1.  a
    
    Recognition conditions
    
2.  b
    
    Classifying or designating identifiable assets acquired and liabilities assumed
    
3.  c
    
    Additional exceptions to the recognition principle.

##### [805-958-25-18A](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-18A)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:49e9a7dc63e9fe57417f3a9ed194c38004b049c84f5f7595e3a8f8b4d1d265cd

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


For guidance on the accounting alternative to subsume certain identifiable intangible assets acquired into goodwill, see Subtopic 805-20 on business combinations—identifiable assets and liabilities, and any noncontrolling interest and see paragraph [805-20-65-2](https://asc.understandingaccounting.org/asc/805/20/#805-20-65-2) for transition guidance on applying the accounting alternative.

##### [805-958-25-19](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-19)

Pending content: no

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


When considering whether an identifiable asset or liability assumed qualifies for recognition as part of applying the acquisition method as described in paragraph [805-20-25-3](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-3), an identifiable asset or liability also qualifies if it is part of what was contributed in an acquisition that includes an inherent contribution (see paragraph [958-805-25-31](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-31)).

##### [805-958-25-20](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-20)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:15d885a2237e7e24f3ebfa3b149c49b0749ea480ba33c2ea356918b71ad87e4c

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Effective as of: not established by retrieval timestamps.


An NFP acquirer is not required to classify investments as described in paragraph [805-20-25-7(a)](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-7). However, an NFP acquirer that is a health care entity (see Section 954-10-15) shall classify particular investments as described in paragraph [954-805-25-1](https://asc.understandingaccounting.org/asc/805/954/#805-954-25-1).

##### [805-958-25-21](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-21)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:31d4a81d27c67f13e232084716927d02a7826a275dd27484c1cca5a6d24c6d32

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


This Subsection provides the following limited exceptions to the recognition principle in paragraph [805-20-25-1](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-1), which are incremental to the exceptions provided by paragraphs

[805-20-25-16 through 25-28](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-16)

:

1.  a
    
    Donor relationships
    
2.  b
    
    [Collections](https://asc.understandingaccounting.org/glossary/c/#collections "Works of art, historical treasures, or similar assets that meet all of the following criteria: They are held for public exhibition, education, or research in furtherance of public service rather than financial gain. They are protected, kept unencumbered, cared for, and preserved. They are subject to an organizational policy that requires the use of proceeds from items that are sold to be for the acquisitions of new collection items, the direct care of existing collections, or both. Collections generally are held by museums; botanical gardens; libraries; aquariums; arboretums; historic sites; planetariums; zoos; art galleries; nature, science, and technology centers; and similar educational, research, and public service organizations that have those divisions; however, the definition is not limited to those entities nor does it apply to all items held by those entities.")
    
3.  c
    
    [Conditional promises to give](https://asc.understandingaccounting.org/glossary/c/#conditional-promise-to-give "A promise to give that is subject to a donor-imposed condition.").
    

Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:

[105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)This Subsection provides the following limited exceptions to the recognition principle in paragraph [805-20-25-1](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-1), which are incremental to the exceptions discussed in paragraphs

[805-20-25-16 through 25-17](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-16)

and related guidance:

1.  a
    
    Donor relationships
    
2.  b
    
    [Collections](https://asc.understandingaccounting.org/glossary/c/#collections "Works of art, historical treasures, or similar assets that meet all of the following criteria: They are held for public exhibition, education, or research in furtherance of public service rather than financial gain. They are protected, kept unencumbered, cared for, and preserved. They are subject to an organizational policy that requires the use of proceeds from items that are sold to be for the acquisitions of new collection items, the direct care of existing collections, or both. Collections generally are held by museums; botanical gardens; libraries; aquariums; arboretums; historic sites; planetariums; zoos; art galleries; nature, science, and technology centers; and similar educational, research, and public service organizations that have those divisions; however, the definition is not limited to those entities nor does it apply to all items held by those entities.")
    
3.  c
    
    [Conditional promises to give](https://asc.understandingaccounting.org/glossary/c/#conditional-promise-to-give "A promise to give that is subject to a donor-imposed condition.").

##### [805-958-25-21A](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-21A)

Pending content: yes

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:768152520b4aa7dffe1292e108958e31aa0908821bb79772538ed587b9e3f04d

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Transition date:(P) December 16, 2028; (N) December 16, 2029Transition guidance:

[832-10-65-2](https://asc.understandingaccounting.org/asc/832/10/#832-10-65-2)The exception to the recognition principle in paragraph [805-20-25-28D](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-28D) for a [grant related to income](https://asc.understandingaccounting.org/glossary/g/#grant-related-to-income "(P) December 16, 2028; (N) December 16, 2029832-10-65-2A government grant, or part of a government grant, other than a grant related to an asset (for example, a grant that reimburses an entity for operating expenses).") is not applicable to entities that apply the guidance within this Subtopic.

##### [805-958-25-22](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-22)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:a62cf9944db09e0a668174f3b7515f0f7e95685e203aa5ff5a4b249d55fe2a3d

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An NFP acquirer shall not recognize an acquired donor relationship as an identifiable intangible asset separate from goodwill. Unlike acquired customer relationships (see paragraphs

[805-20-55-23 through 55-25](https://asc.understandingaccounting.org/asc/805/20/#805-20-55-23)

), acquired donor relationships are not recognized separately; they are instead subsumed into goodwill.

##### [805-958-25-23](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-23)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:7a63e61a09dfe042c4f110ebddaa38d2bcaad136405c80807b77ca71ad48fa28

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An NFP acquirer that has an organizational policy of not capitalizing collections in accordance with paragraph [958-360-25-3](https://asc.understandingaccounting.org/asc/360/958/#360-958-25-3) shall not recognize as an asset those items (works of art, historical treasures, or similar assets) that it acquires as part of an acquisition and adds to its collection. Rather, the acquirer shall do both of the following:

1.  a
    
    Recognize the cost of the collection items purchased (either by the transfer of consideration or the assumption of liabilities in excess of assets acquired) as a decrease in the appropriate class of net assets in the statement of activities and as a cash outflow for investing activities
    
2.  b
    
    Not recognize the fair value of collection items contributed—either as an asset or as contribution revenue.

##### [805-958-25-24](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-24)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:0fe39f8049530b00b766f992a48d2f0bee958c8c64ed6f5f0cc741727dfda3bc

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An acquired item that is not added to the acquirer's collection shall be recognized as an asset in accordance with paragraph [805-20-25-1](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-1).

##### [805-958-25-25](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-25)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:a0a05cb8d4220b80d3fad5210973f33747e81453ad7e01bcc5a6349c5bea6a40

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Example 1 (see paragraphs

[958-805-55-49 through 55-50](https://asc.understandingaccounting.org/asc/805/958/#805-958-55-49)

) and Example 2 (see paragraphs

[958-805-55-51 through 55-54](https://asc.understandingaccounting.org/asc/805/958/#805-958-55-51)

) provide guidance on determining whether an acquired collection item is purchased or contributed and, if purchased, the appropriate amount of cost to attribute to it.

##### [805-958-25-26](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-26)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:7fc0a6b0d87a4a75014c6823f0288e47afd3d65e7f62816cdb060cca2625c750

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An NFP acquirer shall apply the guidance in paragraphs

[958-605-25-11 through 25-15](https://asc.understandingaccounting.org/asc/605/958/#605-958-25-11)

to account for conditional promises to give. That guidance requires the acquirer to do either of the following:

1.  a
    
    Recognize a conditional promise only if the conditions on which it depends are substantially met as of the acquisition date
    
2.  b
    
    Recognize a transfer of assets with a conditional promise to contribute them as a refundable advance unless the conditions have been substantially met as of the acquisition date.

#### Recognizing Goodwill Acquired or a Contribution Received, Including Consideration Transferred

##### [805-958-25-27](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-27)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:6a0f29a8fa906df18b614a66d99563f398727473948bd912f1a374288b5ea67a

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An NFP acquirer applies the guidance in this Subsection instead of Subtopic 805-30 for the recognition of the following items:

1.  a
    
    Goodwill acquired, whether recognized as an asset or as an immediate charge to the statement of activities
    
2.  b
    
    A [contribution](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") received in an acquisition
    
3.  c
    
    Consideration transferred, including [contingent consideration](https://asc.understandingaccounting.org/glossary/c/#contingent-consideration "Usually an obligation of the acquirer to transfer additional assets or equity interests to the former owners of an acquiree as part of the exchange for control of the acquiree if specified future events occur or conditions are met. However, contingent consideration also may give the acquirer the right to the return of previously transferred consideration if specified conditions are met.").

##### [805-958-25-28](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-28)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:75f8fd70f9eb2d3bac40c07346e3eadc5f74ba684ff5655908a301e066f35f94

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Unless the operations of the acquiree are expected to be predominantly supported by contributions and returns on investments (see paragraphs

[958-805-25-29 through 25-30](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-29)

), an NFP acquirer shall recognize goodwill as of the acquisition date, measured in accordance with paragraph [958-805-30-6](https://asc.understandingaccounting.org/asc/805/958/#805-958-30-6).

##### [805-958-25-29](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-29)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:317dec49bf4c81f706047ef254921f5b34e32898284c6dc12ac4d145f7fc3a07

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


If the operations of the acquiree as part of the combined entity are expected to be predominantly supported by contributions and returns on investments, an NFP acquirer shall recognize a separate charge in its statement of activities as of the acquisition date, measured in accordance with paragraph [958-805-30-6](https://asc.understandingaccounting.org/asc/805/958/#805-958-30-6), rather than goodwill. _Predominantly supported by_ means that contributions and returns on investments are expected to be significantly more than the total of all other sources of revenues.

##### [805-958-25-30](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-30)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:065befabecc2c6a7533d8de601da045181957af546b2e8f3f05293e2916ce29b

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An NFP acquirer shall consider all relevant qualitative and quantitative factors in determining the expected nature of the predominant source of support for an acquiree's operations as part of the combined entity. For example, an NFP acquirer shall consider qualitative and quantitative information about all forms of contributed support, including contributions that are precluded from being recognized or are not required to be recognized in the financial statements (such as certain contributed services and collection items and conditional promises to give).

##### [805-958-25-31](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-31)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:c490529177ee095c345d2f923a5531700301e43b968c25b8be1b532a74754335

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An NFP acquirer shall recognize an inherent contribution received, measured in accordance with paragraph [958-805-30-8](https://asc.understandingaccounting.org/asc/805/958/#805-958-30-8), as a separate credit in its statement of activities as of the acquisition date.Example 1 (see paragraphs

[958-805-55-49 through 55-50](https://asc.understandingaccounting.org/asc/805/958/#805-958-55-49)

) and Example 6 (see paragraphs

[958-805-55-62 through 55-67](https://asc.understandingaccounting.org/asc/805/958/#805-958-55-62)

) illustrate acquisitions with inherent contributions.

##### [805-958-25-32](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-32)

Pending content: no

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Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An NFP acquirer might transfer consideration to the former owner of the acquiree or to a designee of the former owner. The NFP acquirer also might receive assistance from an unrelated third party, which shall be taken into account in measuring the consideration transferred. Examples of potential forms of consideration include any of the following:

1.  a
    
    Cash
    
2.  b
    
    Other assets
    
3.  c
    
    A business or a nonprofit activity of the acquirer
    
4.  d
    
    Contingent consideration.

##### [805-958-25-33](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-33)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:0ac0a2ec064cf227c323d559f89df423e25bf7b38a11509ff1b7ad375f7ed8a7

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An asset transferred by an NFP acquirer to an unrelated third party as a required condition of an acquisition shall be accounted for as consideration transferred for the acquiree unless the NFP acquirer retains control over the transferred assets. Example 4 (see paragraphs

[958-805-55-57 through 55-58](https://asc.understandingaccounting.org/asc/805/958/#805-958-55-57)

) illustrates assistance received from a third party.

##### [805-958-25-34](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-34)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:5e4d8045b0cbe8ec62a5b5185f486a64d254d29cc51ce45b78cc15e01cdfa1a0

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Effective as of: not established by retrieval timestamps.


The consideration transferred may include assets or liabilities of the NFP acquirer that have carrying amounts that differ from their fair values at the acquisition date (for example, nonmonetary assets or a business of the acquirer). If so, the NFP acquirer shall recognize the resulting gains or losses, if any, in the statement of activities. However, sometimes the transferred assets or liabilities remain within the combined entity after the acquisition, and the acquirer therefore retains control of them. An NFP acquirer that retains control over the transferred assets shall not recognize a gain or loss in the statement of activities on assets or liabilities it controls both before and after the acquisition.

##### [805-958-25-35](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-35)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:9095e4ce79426acb5cf776c6de0dc9cb227e428ce0e1399e1aa2d0d230363da4

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Examples of asset transfers in which control over the future economic benefits of the transferred assets is retained by the acquirer include all of the following:

1.  a
    
    The assets are transferred to the acquiree rather than to its former owners or are otherwise transferred to a recipient that is controlled by the acquirer. By virtue of its control over the recipient, the acquiring entity has the ability to revoke the transfer or to direct the use of the assets to itself or an affiliate.
    
2.  b
    
    The asset transfer is otherwise revocable, repayable, or refundable.
    
3.  c
    
    The assets are transferred with the stipulation that they be used on behalf of, or for the benefit of, the acquiree, the acquirer, the consolidated entity, or their affiliates. Example 3 (see paragraphs
    
    [958-805-55-55 through 55-56](https://asc.understandingaccounting.org/asc/805/958/#805-958-55-55)
    
    ) illustrates an asset transfer in which the NFP acquirer retains control over the future economic benefits after the acquisition.

##### [805-958-25-36](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-36)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:27:55.035Z to 2026-09-10T01:27:55.035Z

Record version: sha256:63558988e71f43128bec2e0fa1f45ca05a23086ea2c7745a91f51bed2b79db56

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The consideration an NFP acquirer transfers in exchange for the acquiree includes any asset or liability resulting from a contingent consideration arrangement. The NFP acquirer shall recognize the contingent consideration as part of the consideration transferred in exchange for the acquiree.

#### Determining What Is Part of the Acquisition Transaction

##### [805-958-25-37](https://asc.understandingaccounting.org/asc/805/958/#805-958-25-37)

Pending content: no

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Effective as of: not established by retrieval timestamps.


In addition to the examples in paragraph [805-10-25-21](https://asc.understandingaccounting.org/asc/805/10/#805-10-25-21), a payment by a former owner of an acquired business that is unrelated to the acquiree, such as a contribution to fund activities of the acquirer or its affiliates that are unrelated to those of the acquiree, is an example of a separate transaction that is not to be included in applying the acquisition method. Those contributions made shall be accounted for in accordance with the guidance in Subtopic 720-25.