The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-06, Not-for-Profit Entities: (Topic 958): Services Received from Personnel of an Affiliate in April. The guidance in the update – effective for fiscal years beginning after June 15, 2014, and for interim and annual periods thereafter – clarifies the guidance related to how not-for-profits should recognize and measure services provided by personnel of an affiliate under direct supervision of the recipient not-for-profit, or shared services of an affiliate group that the recipient would have to purchase if they were not provided.

1. MHMMessenger
December 2013
TM
M AY E R H O F F M A N M C C A N N P. C . – A N I N D E P E N D E N T C PA F I R M
A publication of the Professional Standards Group
FASB Offers New Guidance to Nonprofits for Services Received from
Personnel of an Affiliate
The Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (ASU) 2013-06,
Not-for-Profit Entities: (Topic 958): Services Received
from Personnel of an Affiliate in April. The guidance in
the update – effective for fiscal years beginning after
June 15, 2014, and for interim and annual periods
thereafter – clarifies the guidance related to how notfor-profits should recognize and measure services
provided by personnel of an affiliate under direct
supervision of the recipient not-for-profit, or shared
services of an affiliate group that the recipient would
have to purchase if they were not provided.
The guidance is applicable to not-for-profit entities
(including business-oriented healthcare organizations)
that receive services from personnel of an affiliate
“that directly benefit the recipient not-for-profit entity
and for which the affiliate does not charge the recipient
not-for-profit entity.” “Charging” a recipient is defined
as requiring payment for the approximate amount of
compensation and fringe benefits of the personnel
providing the services.
This ASU continues the FASB’s program of working to
make not-for-profit financial statements as comparable
as possible among different entities. The clarification
was necessary because not-for-profits previously
used their own judgment regarding how to recognize
our
roots run deep
expenses stemming from such services and often
based their determination on whether or not they paid
for the service. Typically, if the affiliated not-for-profit
entity charged the recipient not-for-profit entity for
the services performed, the recipient recognized an
expense for these services based upon the amount
they were charged.
But in cases where the recipient was not charged,
some organizations recognized contribution revenue
and expense for all such services performed by
affiliates, while others recognized contribution
revenue and expense based on contributed services
guidance, which states that “contributed services
should be recognized for those items that create or
enhance nonfinancial assets or require specialized
skills, are provided by individuals possessing those
skills, and typically would need to be purchased if
not provided by donation.” Other organizations have
simply elected not to recognize contribution revenue
or expense for such services.
The guidance in ASU 2013-06 eliminates any
confusion. Under the update a recipient not-forprofit entity “must recognize all services received
from personnel of an affiliate that directly benefit
the recipient organization.” In terms of adopting this
ASU, early adoption is permitted and organizations
have options upon adoption. A recipient not-for-profit
may adopt the Update prospectively or by using a
modified retrospective approach – all prior periods
presented upon the date should be adjusted; however,
adjustment may not be made to the beginning balance
of net assets of the earliest period presented.
TM
© 2 0 1 3 M AY E R H O F F M A N M C C A N N P. C . 877-887-1090 • www.mhmcpa.com • All rights reserved.

2. MHMMessenger
How those services from affiliates should be
measured
According to FASB, services from affiliates should
be measured “at the cost recognized by the affiliate
for the personnel providing those services.” There
is an exception, though. If measuring such a service
would “significantly overstate or understate the value
of the service received, the recipient not-for-profit
entity may elect to recognize that service received
at either the cost recognized by the affiliate for the
personnel providing that service, or the fair value of
that service.” If the cost recognized by the affiliated
entity is unknown or difficult to obtain, the recipient
not-for-profit may use any “reasonable and verifiable
manner” to estimate those costs.
Recipient
not-for-profits
should
report
the
corresponding decrease in net assets or the creation
or enhancement of an asset resulting from the use of
services received from personnel of an affiliate similar
to how other such expenses or assets are reported.
For more information
If you have any questions related to this guidance,
please contact Michelle Spriggs of MHM’s
Professional Standards Group or your local MHM
office. Michelle can be reached at 774.206.8336 or
mspriggs@cbiztofias.com.
Financial statement presentation
The increase in net assets associated with services
provided by personnel of an affiliate for which the
recipient not-for-profit is not charged cannot be
reported as a contra-expense or contra-asset. While
FASB does not mandate presentation guidance for
the increase in net assets associated with these types
of services, the board expects that most recipient
not-for-profits will record the increase in net assets
associated with the services received as contribution
revenue.
The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM auditor to further discuss the impact on your audit or audit report.
2
© 2 0 1 3 M AY E R H O F F M A N M C C A N N P. C . 877-887-1090 • www.mhmcpa.com • All rights reserved.