USA Liability Assumption in Nonprofit Merger

[NonprofitNinja]

Hi all!

I am responsible for Financial Reporting at a nonprofit organization in the USA. Earlier this year, we merged with another organization with a similar mission to ours. Our intention is to effectively dissolve the entity we merged with following the conclusion of its last contract. We do prepare consolidated financials for the organization as a whole. However, for the meantime it is still considered a separate legal entity, and we are required to provide separate quarterly financial statements for them to their bank.

My question is this: if the affiliate entity assumes new liabilities following the merger (for example, a retention bonus for long-term employees), should they be reported on the unconsolidated financials of the parent entity or the affiliate entity? Any ASC references on this matter would be greatly appreciated. If there is nothing in the codification that you are aware of on the matter (I have been researching it pretty thoroughly with no luck), what is the industry best practice? Thanks in advance for your input!

 

[kirby]

If the affiliate entity entered into an agreement creating new liabilities then those should be recorded in the affiliate entity's books.

 

[NonprofitNinja]

Thanks for the input, Kirby.

Is there authoritative GAAP guidance for this, or is it just a best-practice? I searched through ASC 958-805, but couldn't find any guidance one way or the other.

 

[kirby]

Basic GAAP that says if you have a liability record it in your books. If you need a cite you gotta go way back to the GAAP business entity CONCEPT which says the entity's balance sheet has to reflect its financial position.