At the July 20, 2017 EITF meeting, the SEC Observer stated that the SEC would not object to certain public business entities (PBEs) adopting the new revenue and leases standards using the timeline otherwise afforded private companies.
The FASB’s definition of PBE includes entities whose financial statements or financial information are included in an SEC filing, such as when a registrant’s equity method investee is considered significant under Rule 3-09 or Rule 4-08(g) of Regulation S-X and when an acquired entity’s financial statements are required to be filed under Rule 3-05.
The announcement allows entities that are PBEs solely due to the inclusion of their financial statements or financial information in another entity’s filing with the SEC to apply the new revenue and leases standards using the effective dates applicable to private companies.
These entities may still elect to adopt the new revenue and leases standards in accordance with the effective dates for PBEs. This announcement does not apply to entities that meet any of the other criteria of a PBE.
The SEC allows certain PBEs to use the private company effective dates of the revenue and leases standards.
In many cases, inclusion of financial statements or financial information in SEC filings would have required otherwise private companies to adopt the new revenue and leases standards using the effective dates required for PBEs. In other words, for purposes of these SEC filings, these entities would have had to adopt the new standards a full year earlier than other private companies.
A registrant should understand whether their significant equity method investees will elect to delay their planned transition for the revenue and leases standards and assess the impact on the registrant’s disclosures.
© 2016 - 2017 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.