The following table identifies the changes made to this Subtopic.
In some cases, the relationship between the
financially interrelated entities requires consolidation, as discussed in Subtopic
958-810.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
958-10-15, with specific qualifications noted below.
The guidance in this Subtopic applies to the following types of transactions:
- a
Transactions in which an entity—the donor—makes a contribution by transferring assets to a not-for-profit entity (NFP) or charitable trust—the recipient entity—that accepts the assets from the donor and agrees to use those assets on behalf of or transfer those assets, the return on investment of those assets, or both to a financially interrelated entity—the beneficiary—that is specified by the donor - b
Transfers that take place in a similar manner to (a) but are not contributions for either of the following reasons:
- 1
The entity that transfers the assets to the recipient entity—the resource provider—is related to the beneficiary in a way that causes the transfer to be reciprocal.
- 2
Conditions imposed by the resource provider or the relationships between the parties make the transfer of assets to the recipient entity revocable or repayable.
This Section, which is an integral part of the requirements of this Subtopic, provides general guidance to be used by a
not-for-profit entity (NFP) in reporting relationships with
financially interrelated entities.
The flowchart in paragraph
958-605-55-74 depicts the process of applying the requirements of Sections
958-20-15 and
958-20-25.
This Example illustrates the guidance in paragraphs
958-20-15-2 and
.
Corporation sends dental supplies to University Foundation to be used by students in University's dental clinic. University Foundation's bylaws state that it is organized for the purpose of stimulating voluntary financial support from alumni and other donors for the benefit of University, especially for addressing the long-term academic priorities of University. As with most gifts it receives, University Foundation can choose the timing of the distribution to University and can place additional limitations on the distribution if those limitations are consistent with Corporation's restrictions. University does not control University Foundation.
If, instead, University controlled University Foundation, University would be able to access at will any assets held by University Foundation. Implying a time restriction on the gifts held by University Foundation would be inappropriate. When recognizing the change in its interest in University Foundation, University would report the resulting net assets in the same net asset classifications as University Foundation.
This Example illustrates the guidance in paragraphs
958-20-15-2 and
.
Corporation transfers cash to Healthcare Foundation and requests that Healthcare Foundation use the gift to provide healthcare benefits to the community. Healthcare Foundation's bylaws state that it is organized for the purpose of stimulating voluntary financial support from donors for the benefit of Hospital, Nursing Home, and Walk-in Clinic, all of which are located in the community. Hospital, Nursing Home, Walk-in Clinic, and Healthcare Foundation are affiliates that are controlled by Healthcare System.
If Healthcare Foundation, Hospital, Nursing Home, and Walk-in Clinic entered into an agreement that specified how gifts without donor restrictions to Healthcare Foundation should be divided, each affiliate would also include its share of Healthcare Foundation's net assets without donor restrictions, computed in accordance with that agreement, when it measured its interest in Healthcare Foundation. Similarly, if Healthcare System directed that gifts without donor restrictions to Healthcare Foundation be distributed to the three affiliates in accordance with a specified formula, each affiliate would include its share of net assets without donor restrictions, computed in accordance with that formula, when it measured its interest in Healthcare Foundation.
This Example illustrates the guidance in paragraphs
958-20-15-2 and
.
Individual transfers cash to Arts Foundation and specifies that the money be used to support the expenses of the ballet. Arts Foundation's bylaws state that it is organized for the purpose of stimulating voluntary financial support from donors for the benefit of Community Ballet and Community Theater. At the time Arts Foundation was created, the three NFPs entered into an agreement that specifies that if a donor does not specify the NFP to which the gift should be transferred, the gift will be split equally between Community Ballet and Community Theater. The agreement also specifies that representatives from the three NFPs will meet annually and determine campaign priorities for the next year and the costs of operating Arts Foundation will be equally split between Community Ballet and Community Theater. Arts Foundation is not controlled by Community Ballet, Community Theater, or Individual.