FASB Statement No. 164, Not-For-Profit Entities: Mergers and Acquisitions was amended at the beginning of the year. The updates were to be in effect beginning in 2010 for calendar year entities. The main criterion to distinguish between a merger and acquisition is determining if one entity obtained control over the other. If this occurred, the transaction is defined as an acquisition. If the entity ceded control to a new not-for-profit entity, it is recorded as a merger.
Social venture capital has become the new source of funding for struggling nonprofit organizations in response to the economic recession. It is also due to a new growing trend of investors wishing to align their investments with social missions. Bill Gates, Ted Leonsis and Steve Case have become the leaders of the trend, where the investors are now using their money to earn “social returns.”
Bookda Gheisar, executive director of Seattle-based Global Washington, claims that “funding is shifting, and nonprofits have been really forced to think about new sources of revenues.”
The economic recession has market participants questioning what events led to the crisis, and what steps need to be taken to reduce the risk of future crises. Although auditors are not being blamed for the financial meltdown, Michael Izza, author of the article and CEO of the Institute of Chartered Accountants in England and Wales (ICAEW), is examining their role in the banking crisis, and ways their roles as auditors can be improved to better identify systematic risk problems. Izza states that “making sure the audit process continues to meet market expectations must be a priority.”
According to the Blackbaud Index of Charitable Giving, overall revenue increased by approximately 12.1% from February through April, compared to the same period in 2009. This statistic reflects 1,400 nonprofit organizations representing $2.2 billion in revenue. Also according to the index, a soar in revenue for organizations earning less than $1 million was recorded resulting in a gain of 12.3 percent
During the comparable period, a revenue increase of 19.2 percent was experienced for companies with revenue of more than $10 million, and organizations earning revenue between $1 million and $10 million underwent a slight 2.5 percent gain in revenue.
A three-month moving average of year-over-year percent changes in revenue is used to calculate the numbers reflected in the index. Chuck Longfield, chief scientist at Blackbaud, claims the reasoning behind the calculation is due to the fact that companies have events or mailings that take place at approximately the same time every year. He says that “if an event was in late April one year but early May the next, the change in monthly revenue might be significant while the change in revenue over a three-month period might actually be the same.” Therefore by using a moving average, the index is less sensitive to timing issues while also serving as a more useful decision-making tool. Although, Longfield claims that one disadvantage to the moving average is that “the “smoother” index will dampen large fluctuations caused, for example, by disaster relief giving.”
Even amidst the economic recession, smaller and larger nonprofit organizations are showing signs of economic life.
Improvements to the disclosure requirements related to Fair Value Measurements and Disclosures (Topic 820) were completed after receiving input from users of financial statements. These amendments will be effective for years beginning after December 15th, 2009 (2010 for calendar year entities), with the exception of the disclosures regarding purchases, sales, issuances, and settlements in the roll forward of activity of fair value measurements for Level 3, which will be effective for fiscal years commencing after December 15th, 2010 (2011 for calendar year entities).