Accounting for Nonprofit Mergers and Acquisitions
- Monday, October 9, 2017
Author: Marie Brilmyer
When a nonprofit organization combines with one or more other nonprofits, using the proper accounting treatment depends on if it is deemed a merger or an acquisition. Generally Accepted Accounting Principles (GAAP) differentiate between a merger and an acquisition as follows:
The premise behind a merger is that no combining nonprofit organization dominates the new organization. So while a new legal entity does not need to be formed, to qualify as a new nonprofit organization a new governing body must be formed. In addition, the combining organizations should share (as equally as possible) the ability to appoint governing board members of the new entity, retain key employees, and have a say in bylaws and operating policies and practices of the new organization.