I work for a community foundation (non-profit). We recently affiliated with another community foundation who is dissolving their EIN to roll into ours; they will no longer produce their own 990 after this last one. My question is how do I treat the transfer of net assets. Is it a straight transfer of net assets to our equity accounts or do I need to consider it a contribution from the former community foundation since it has not been on our 990 in past years? Is there any posted guidance (IRS, FASB, GASB, etc.) that is why the response is what it is?
USA Community Foundation-Net Assets
- Thread starter Crysgen
- Start date
The first place to look is the organization's agreement when it was established as to how to treat transfer in/out of assets from/to another exempt organization. State law may control here, and not solely accounting principles.
- Joined
- Oct 4, 2022
- Messages
- 7
- Reaction score
- 3
- Country
Hi @Crysgen
Agreed with looking into the agreement/arrangement. Would be useful to know information about the situation - will the “dissolving” entity be combined into succeeding entity? Or will the “dissolving” entity be paying off all of its debts/payables and selling off its assets and then donating the remaining funds to the main organization?
Depending on the situation, this sounds rather akin to a type of business combination. The applicable guidance would be found in ASC 805. In this process, you would measure the assets and liabilities assumed at their fair value and add them on top of your current balance sheet.
It may also end up just being an “asset acquisition” at which point, the guidance is a bit simpler.
A lot of factors to think about! Hope the above helps a bit
Agreed with looking into the agreement/arrangement. Would be useful to know information about the situation - will the “dissolving” entity be combined into succeeding entity? Or will the “dissolving” entity be paying off all of its debts/payables and selling off its assets and then donating the remaining funds to the main organization?
Depending on the situation, this sounds rather akin to a type of business combination. The applicable guidance would be found in ASC 805. In this process, you would measure the assets and liabilities assumed at their fair value and add them on top of your current balance sheet.
It may also end up just being an “asset acquisition” at which point, the guidance is a bit simpler.
A lot of factors to think about! Hope the above helps a bit