On August 7, the FASB issued an exposure draft on the definition of a public business entity and endorsed the PCC proposal for VIE considerations of common control leases.
Definition of a Public Business Entity
On August 7, the FASB issued an exposure draft on the definition of a public business entity, which would create a de facto definition of a nonpublic entity. The proposed definition does not replace the definitions of a public entity currently existing in GAAP. Instead, the definition will be used in determining the scope for which entities are eligible for the accounting alternatives approved by the FASB and the PCC.
Under the proposal, an entity meeting any one of a set of five criteria will be considered a public business entity and thus not eligible to apply the alternatives available to nonpublic entities.
The proposed definition will result in more companies being considered “public business entities” than under the definitions used in U.S. GAAP today. Accordingly, companies should pay careful attention to determine if they are eligible for the alternatives.
Comments on the proposed definition are due by September 20.
FASB endorsement of PCC Proposal
Also on August 7, the FASB endorsed the PCC proposal that would provide a nonpublic entity the option to not apply the VIE model to certain common control leasing arrangements.
The FASB is expected to issue a proposed ASU by August 23, for which the comment period is expected to end on October 14. The PCC intends to redeliberate the proposal at its November 12 meeting. If the PCC re-approves the proposal after the exposure period ends, the proposal will be subject to final endorsement by the FASB before a final ASU is issued.