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Tuesday, February 12, 2013 3:00-4:00 PM ET Presenters: Gayle Harrold, CFO, Madison Park Development Corp Scott Seamands, Partner, Lindquist, von Husen.

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Presentation on theme: "Tuesday, February 12, 2013 3:00-4:00 PM ET Presenters: Gayle Harrold, CFO, Madison Park Development Corp Scott Seamands, Partner, Lindquist, von Husen."— Presentation transcript:

1 Tuesday, February 12, 2013 3:00-4:00 PM ET Presenters: Gayle Harrold, CFO, Madison Park Development Corp Scott Seamands, Partner, Lindquist, von Husen & Joyce LLP STRENGTH MATTERS ® Best Practices in Financial Reporting Webinar Series Made possible by the generous support of The John D. and Catherine T. MacArthur Foundation Audio Conference Info  Call-in #: 866-363-6079  Passcode: 851 497 0973 Audio Conference Info  Call-in #: 866-363-6079  Passcode: 851 497 0973 Consolidated Financial Statements 101: Session 2 - Consolidation of Controlled but not Wholly Owned Entities

2 About STRENGTH MATTERS A national collaborative sponsored by NeighborWorks ® America, Housing Partnership Network (HPN), and Stewards of Affordable Housing for the Future (SAHF), with ongoing support from The John D. and Catherine T. MacArthur Foundation. Our partners also include: Calvert Foundation Enterprise Community Loan Fund F.B. Heron Foundation Ford Foundation Housing Assistance Council Housing Partnership Fund Local Initiatives Support Corporation Low Income Investment Fund Mercy Loan Fund NeighborWorks ® Capital

3 Website Info  www.strengthmatters.net www.strengthmatters.net  Please register if you have not already.  Site provides access to over 20 financial reporting best practices papers and other resources.  Upcoming Webinars and recordings of past sessions are posted.

4 www.strengthmatters.net

5 Getting Started  All participant lines will now be muted.  Have a question? Please use the Chat feature and send the Presenters or the Host (Francie Ferguson) your question.  To ask via phone, please wait for a pause in the presentation and un-mute your phone to speak: #6.

6 Quick Poll  Please take a minute to complete the Poll in the Polling panel on the right side of your screen.  Be sure to click Submit when you’ve finished.  NOTE: Polls help to verify participation throughout the webinar. If you plan to petition your state board of accountancy for CPE credits, please complete and submit ALL polls.

7 Learning Objectives Explain the concept of non-controlling interests. Examine the impact on the statement of assets, statement of changes in net assets and the roll-forward of unrestricted, temp and perm restricted net assets. Assess the impact of non-controlling interests on your eliminating entries.

8 Questions or Concerns?  Any Questions before we begin?  Please use #6 to unmute your phone to ask a question, or  Use the Chat function via WebEx.  Use *6 to place your line on mute when finished speaking.

9 Meet the Presenters  S. Scott Seamands, CPA  Partner, Lindquist, von Husen & Joyce LLP  Gayle Harrold, CPA  Chief Financial Officer, Madison Park Development Corporation

10 Prior Strength Matters Consolidation Sessions Consolidations 101  Why should your organization present consolidated financials?  Preparation needed before you consolidate  Typical Balance Sheet & Income Statement eliminations, including development fee  Common implementation issues Advanced Consolidation Issues  In-depth discussion about development fee eliminations  Common elimination issues, such as profit in development fee, elimination of a receivable that is fully reserved by the sponsor  Classification differences between property financials and non-profit financials that require adjustment

11 Prior Strength Matters Consolidation Sessions Financial Statement Presentation  Consolidated or Consolidating Financials  Consolidating Financials – How to group your organization’s activities to best tell your story  Impact of format selected on all statements and your footnotes  Initial Year of implementation – Will you restate the prior year or issue a single year the first year you consolidate?

12 Interested in a prior session? Visit www.strengthmatters.net to view recorded webinars and download presentations.www.strengthmatters.net Recordings of webinars are posted to the Member Resources page of the StrengthMatters site.

13 Non-Controlling Interests  What are non-controlling interests? The portion of a partnership that is not owned by you.  In a typical syndicated tax credit residential partnership: Sponsor owns 1%, Investor limited partner owns 98% Special limited partner (owned by the investor) has a 1% share

14 Non-Controlling Interests  Why do you have to consolidate an entity of which you do not own greater than 50%?  EITF 04-5 issue in 2004 determined that a sole general partner should consolidate a limited partnership if:  The general partner controls the day to day operations  The limited partner’s rights are “protective” rather than “participating”  The limited partner could not kick the general partner out without cause The existence of these conditions results in control being exercised over the partnership by the general partner and is therefore required to be consolidated with the general partner

15 Questions?  Please use #6 to unmute your phone to ask a question, or  Use the Chat function via WebEx.  Use *6 to place your line on mute when finished speaking.

16 Preparation  Review partnership or operating agreements for all entities that your company is involved with.  Following your review you should be able to document: Which entities are wholly owned Which entities are controlled Which entities you are involved with but do not control, regardless of % of ownership interest

17 Balance Sheet Presentation of Non-Controlling Interest  The section of your net assets pertaining to the non-controlling interests will be labeled Net Assets, attributable to non-controlling interests  See Exhibit 1.

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19 Statement of Changes in Net Assets  Your changes in Net Assets will include a roll forward of the assets owned by the sponsor and a roll forward of net assets owned by the investor limited partners, by class of net assets – Unrestricted, Temporarily Restricted and Permanently Restricted  See Exhibit 2.

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21 Questions?  Please use #6 to unmute your phone to ask a question, or  Use the Chat function via WebEx.  Use *6 to place your line on mute when finished speaking.

22 How do you calculate the Non-Controlling Interest?  If there are no eliminating entries, it is simply a matter of multiplying the net income (loss) of your residential partnership by the ownership interests involved.  Residential Property A has a net loss of $186,290 Loss allocated to ABC - $1,863 Loss allocated to Investor LP – $182,564 Loss allocated to Special Limited LP - $1,863

23 How do eliminating entries affect the non-controlling interests?  You must decide whether your eliminating entries will impact the non-controlling interest’s share of net income and net assets  There are two common approaches to determining where the eliminations should be recorded: See Exhibit 3 Sample Workbook.

24 Questions?  Please use #6 to unmute your phone to ask a question, or  Use the Chat function via WebEx.  Use *6 to place your line on mute when finished speaking.

25 Quick Poll & Questions  While we take questions, please take a minute to complete the Poll in the Polling panel on the right side of your screen.  Be sure to click Submit when you’ve finished.  NOTE: Polls help to verify participation throughout the webinar. If you plan to petition your state board of accountancy for CPE credits, please complete and submit ALL polls.

26 Control issues related to non-profits  Control of a non-profit is determined by board representation  If your organization appoints more than 50% of the board of the affiliated NPO, then we would combine that NPO with our organization’s financial statements.  Combined financials are added to your organization’s financials in the same manner as the entities that are consolidated. The terminology differs because there is no ownership interest involved.

27 Conclusion  Non-controlling interests add a level of complexity to the consolidation process that should not be under estimated.  Consider the use of a workbook to help gather all information pertaining to each of the properties that you do not wholly own but must be consolidated.

28 Conclusion  The format presented here works when you have only a handful of partnerships to consolidate. If you have more than 15-20 properties, another method for gathering data may be more efficient.  Although this presentation will show you how to consolidate using Excel, automation of the process is preferred and will depend upon your financial software. Excel, while useful, will not be your friend in the end.

29 Questions?  Please use #6 to unmute your phone to ask a question, or  Use the Chat function within WebEx.

30 **Evaluation Poll**  Please complete the Evaluation in the Polling panel on the right side of your screen before you exit the WebEx meeting.  Be sure to click Submit when finished.  REMEMBER: If you plan to petition your state board of accountancy for CPE credit, you must complete and submit ALL polls.  This poll will remain open for 15 minutes.

31 THANK YOU for Joining Us! Stay Tuned!  A recording of this session will be available on the STRENGTH MATTERS website in the next week.  More webinars focused on STRENGTH MATTERS white papers will be announced in 2013! Visit www.strengthmatters.net to view recorded webinars and download presentations.www.strengthmatters.net

32 Contact Information  Gayle Harrold: 617-849-6224, gharrold@madison-park.org gharrold@madison-park.org  Scott Seamands: 415-905-5408, sseamands@lvhj.com sseamands@lvhj.com  Frances Ferguson: 512-441-5441, fferguson@nw.org fferguson@nw.org  Lindsay Wells, 617-821-0463, consult.lwells@gmail.com consult.lwells@gmail.com


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