Financial reporting

  A GAAP exception approved by the Private Company Council (PCC) would exempt private companies from applying consolidation guidance for variable-interest entities (VIEs) under common-control leasing arrangements.

Some changes were made from the original proposal, as the PCC struggled with concerns over the definition of “common control” and other issues. The PCC decided to clarify the concept of common control for the purposes of this exception in the exception’s Basis for Conclusions.

In addition, the PCC specified that the exception can be used only if the lessor entity’s liabilities only finance the assets leased to the operating company and are not collateralized by the operating company’s assets.

The exception would apply to all entities, except for public business entities, not-for-profit entities, and employee benefit plans. The exception has been forwarded to FASB for endorsement and will be written into GAAP if approved by FASB.

FASB also will consider the alternative’s applicability to public companies.

The PCC continued discussions on two additional proposals and instructed FASB’s staff to conduct additional research for further discussion at the next PCC meeting on Jan. 28. The staff will perform more research on proposals regarding:

  • The combined instruments approach to accounting for certain receive-variable, pay-fixed interest rate swaps.
  • Accounting for identifiable intangible assets in a business combination.

  A new FASB proposal seeks to eliminate the designation of “development stage entity,” as well as related disclosure requirements, from U.S. GAAP.

FASB issued a Proposed Accounting Standards Update (ASU) that originated with the PCC and was expanded in scope to include public and private companies. The proposal is available at

A development-stage entity devotes substantially all its efforts to establishing a new business for which planned principal operations either have not commenced or have not produced significant revenue.

U.S. GAAP currently requires development-stage entities to present the same basic financial statements according to the same rules as established operating organizations for recognition and measurement, startup costs, and other similar costs.

Development-stage entities also currently are required to present inception-to-date information about income statement line items, cash flows, and equity transactions. Stakeholders had expressed concern about the cost and relevance of the additional presentation requirements.

Comments on the Proposed ASU, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, were due Dec. 23.


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