Services Received from Personnel of an Affiliate

CPA tysons, CPA vienna, CPA centerville, CPA fairfax, CPA northern va, CPA washington dcThe Financial Accounting Standards Board (FASB) issued a new update in April 2013: ASU No. 2013-06, Not-for-Profit Entities (Topic 958). What does this mean? It now requires that any services you receive from the personnel of an affiliate organization, should be recognized as charitable donation. Say, for instance, your nonprofit organization is a church, and that church has an affiliate bookstore. An affiliate, by FASB terms, is defined as “a party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity.”

Let’s say, now that this “affiliate” bookstore may pay someone to perform CPA services in Vienna, while the church does not. In this case, if the church were to then use the bookstore’s accountant to assist, free of charge in its tax planning services, then the church would have to acknowledge those accounting service as a charitable contribution. This goes for any service that a nonprofit entity (in this case, the church) receives from the Northern Virginia CPA  of an affiliate (in this case, the bookstore).

Any service, such as the Northern Virginia CPA service provided, that directly benefits the nonprofit organization, should be recognized as a charitable contribution for tax planning purposes. Thus, it should be valued at the amount that the non-profit would normally pay for that service. These services, according to FASB guidelines should be recognized as donations if they 1) enhance or create nonfinancial assets for the 501(c)(3). Or 2) require particular expertise, are supplied by someone with those expertise, and would generally have to be bought if not provided by donation. An affiliate group’s accountant is an excellent example of this as it is something for which businesses generally pay. Also, accounting may fall under this definition because accounting services in Vienna require a great deal of expert analysis.

The amendments presented here are meant to guide not-for-profit entities in properly acknowledging and quantifying services from personnel of the affiliate. While these changes will not become effective until 2015, not-for-profits are permitted to adopt this practice early. To learn more contact a Northern VA CPA at Gurman & Company today.