Private companies would be able to choose and use only the GAAP exceptions or modifications that make sense for them in their financial reporting under a new proposal released April 15 by FASB.
FASB and the Private Company Council (PCC) issued an Invitation to Comment, available at tinyurl.com/c6gezjq, on the private company decision-making framework. Comments are due June 21.
The decision-making framework will provide conditions under which the PCC can consider and vote on exceptions and modifications to GAAP for private companies. The PCC was formed last year, and its recommendations for exceptions and modifications are subject to endorsement by FASB.
In February, FASB and the PCC deliberated feedback on a previous Invitation to Comment that FASB issued on the private company decision-making framework in July 2012. As early as December of last year, PCC members largely opposed the “all-or-nothing” approach FASB originally proposed, which would have required private companies to use either all or none of the GAAP modifications and exceptions created through the PCC process.
The new proposal would allow a private company to select only the alternatives within GAAP for recognition or measurement guidance that it deems appropriate.
In addition, the new proposal would remove the presumption that industry-specific recognition and measurement guidance applies to users of both public and private company financial statements. This would open the door for exceptions and modifications for private companies with respect to industry-specific guidance.
Investors told FASB that current GAAP calls too often for disposals of assets to be presented as discontinued operations.
FASB has responded to those concerns by issuing a proposal that would redefine “discontinued operation” in such a way that discontinued operations disclosures would be required only for disposals that are considered significant changes in strategy.
Comments are requested by Aug. 30 on the Proposed Accounting Standards Update (ASU), Presentation of Financial Statements (Topic 205)—Reporting Discontinued Operations. The proposal is available at tinyurl.com/cmpwvbz.
Discontinued operations and other disposals that do not qualify for discontinued operations presentation in the financial statements would still be subject to additional disclosures under the proposal.
In addition, disclosures about an organization’s continuing involvement with a discontinued operation would be expanded. Continuing involvement disclosures would be required until the discontinued operation’s results no longer are separately presented in the statement where net income is reported.
If approved, according to FASB, the proposal would achieve greater convergence with IFRS No. 5, Non-Current Assets Held for Sale and Discontinued Operations.
FASB amended financial reporting standards to resolve diversity in practice related to financial reporting involving the narrow issue of a parent entity’s accounting for the cumulative translation adjustment of foreign currency into net income upon derecognition of foreign subsidiaries or assets.
The amendments are contained in ASU No. 2013-05, Foreign Currency Matters (Topic 830), Parent’s Accounting for the Cumulative Translation Adjustment Upon Derecognition of Certain Subsidiaries or Groups of Assets Within a Foreign Entity or of an Investment in a Foreign Entity.
Originally a project undertaken by FASB’s Emerging Issues Task Force, the ASU is designed to eliminate diversity that had emerged with regard to the application to the release of the cumulative translation adjustment into net income.
The ASU is available at tinyurl.com/armzgfr.
New standards proposed by the Federal Accounting Standards Advisory Board (FASAB) are designed to make sure the appropriate agencies and organizations are included in the federal government’s financial reporting.
Under the proposed standards, available at tinyurl.com/cx4qzrx, the governmentwide general-purpose federal financial report (GPFFR) would include organizations that are:
- Budgeted for by elected officials of the federal government;
- Owned by the federal government; or
- Controlled by the federal government with risk of loss or expectation of benefits.
The proposal also would require that the GPFFR include an organization if it would be misleading to exclude that organization, even if it does not meet one of the three inclusion principles.
With the proposal, FASAB is refreshing inclusion standards that date to 1995.
Comments are requested by July 3. The proposed statement would take effect for periods beginning or after Sept. 30, 2016; earlier implementation would be encouraged. FASAB also has scheduled a public hearing on the proposal for its Aug. 28 board meeting.