Reporting Related Entities
Section 4450 of the CICA Handbook sets out some very specific and unique standards for reporting the results of related entities where the reporting entity either controls, has a significant interest in, or has an economic interest in another organization.
- A non-profit organization may either consolidate a controlled non-profit organization (by way of a line by line consolidation of the balance sheet, results of operations, notes, etc), or provide certain note disclosures.
- A non-profit organization may either consolidate a controlled for-profit organization (by way of a line by consolidation of results) or apply the equity method of accounting (a method where the financial reporting is limited to the reporting entity’s investment in the for-profit, and its share of the net income of the for-profit). If the equity method is used, additional note disclosure is required.
- Where an organization has an interest in a joint venture, it should use proportionate consolidation (under this method of accounting, the results of the venture are consolidated line by line in proportion to the organization’s share of the venture). Alternatively the organization may use the equity method of accounting and provide certain note disclosure.
- Where a non-profit has significant influence over another non-profit, it must provide certain note disclosures.
- Where a non-profit has significant influence over a for-profit, it must apply the equity method of accounting.
- An economic interest in another non-profit requires certain note disclosure.
- Where the fiscal year-end of the related entity differs from the fiscal year-end of the reporting entity, there should be a disclosure of the periods accounted for and any significant subsequent events or transactions not accounted for. (4450.47)