As More Not-for-Profits Acquire and Merge, Accounting Guidance Needed

ARLINGTON, Va., April 28, 2009 — Challenged with rising demand, rising costs, and declining revenue, many not-for-profits are now consolidating with other not-for-profits in an attempt to survive and emerge as stronger, more cost-effective organizations. BNA's latest analysis, Accounting for Combinations of Not-for-Profit Organizations examines mergers and acquisitions between not-for-profit organizations and explains, in detail, two methods of accounting for these strategic changes.

Portfolio 5203 in BNA's Accounting Policy and Practice Portfolio Series, walks not-for-profit professionals - managers, financial officers, and their financial and legal consultants - through the rigorous M&A accounting process from start to finish.

Coauthors Dominic Daher and Stacy Daher, both of the University of San Francisco, provide sample financial statements, each illustrating how to account for a merger or acquisition under a different method of accounting. They detail how to present the post-merger financial statements and discuss how to account for any acts of goodwill or other intangibles identified through the merger or acquisition.

While adhering to existing rules for mergers and acquisitions of not-for-profits, this Portfolio also explains the proposed rules that will most likely replace them. Although these proposed rules may not be enacted in their current form, they nevertheless provide unofficial guidance for applying particular aspects of the current rules.

"At a time when many not-for-profits are coming under siege, mergers and acquisition activity is likely to intensify," says George Farrah, senior tax and accounting analyst with BNA. "The authors explore every likely M&A consideration: from the nature of these not-for-profit business combinations, salient standards, 'polling of interests' and 'purchase' methods of accounting to accounting for goodwill and consolidated financial statements. They even give full examination of the proposed rules regarding financial statement presentations, accounting for goodwill and other intangible assets."

Both Dominic L. Daher and Stacy E. Daher have practical, firsthand experience dealing with the rules in the Portfolio and with accounting rules and issues concerning not-for-profits in general. Mr. Daher is the Director of Internal Audit at the University of San Francisco; Ms. Daher is the Assistant Treasurer. Together, they also wrote BNA Tax and Accounting Portfolio 5200, Accounting for Not-for-Profit Organizations.