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Not-for-Profit Entities—Consolidation

The Board is issuing this Update to amend the consolidation guidance in Subtopic 958-810, Not-for-Profit Entities—Consolidation, to clarify when a not-for-profit entity (NFP) that is a general partner or a limited partner should consolidate a forprofit limited partnership or similar legal entity once the amendments in Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, become effective.

Current generally accepted accounting principles (GAAP) require an NFP that is a general partner of a for-profit limited partnership or similar legal entity to apply the consolidation guidance in Subtopic 810-20, Consolidation—Control of Partnerships and Similar Entities, unless that partnership interest is reported at fair value in accordance with certain other guidance. The amendments in Update 2015-02 superseded the guidance in Subtopic 810-20 and added new guidance for limited partnerships and similar legal entities to the general consolidation guidance in Subtopic 810-10, Consolidation—Overall. Therefore, once the amendments in Update 2015-02 are effective, GAAP will require an NFP that is a general partner of a for-profit limited partnership or similar legal entity to apply the general consolidation guidance in Subtopic 810-10.

Since the issuance of Update 2015-02, stakeholders noted that the guidance that was added to the general consolidation guidance in Subtopic 810-10 presumes that an entity would first navigate through the variable interest entity (VIE) consolidation guidance before applying the general consolidation guidance. However, NFPs generally are not included within the scope of the VIE consolidation guidance. Therefore, stakeholders noted that when an NFP
navigates directly to the general consolidation guidance in Subtopic 810-10, the guidance does not address when a general partner should consolidate a for-profit limited partnership, but rather when a limited partner should consolidate the partnership.

The amendments in this Update maintain how NFP general partners currently
apply the consolidation guidance in Subtopic 810-20 by including that guidance within Subtopic 958-810. The amendments also add to Subtopic 958-810 the general guidance in Subtopic 810-10 on when NFP limited partners should consolidate a limited partnership.

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