FASB proposes eliminating “development stage entity” distinction

BY KEN TYSIAC

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

FASB on Thursday issued a Proposed Accounting Standards Update (ASU) that originated with the Private Company Council (PCC) and was expanded in scope to include public and private companies.

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.

Many development-stage entities do not intend to ever manufacture a product, but rather sell their research and development to another business for manufacture. These entities most often exist in the pharmaceutical, biotechnology, and technology industries, according to FASB, and they often remain in the development stage for several years, or even permanently.

Comments on the Proposed ASU, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, are due Dec. 23 and can be made through FASB’s website.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

SPONSORED REPORT

Keeping client information safe in an age of scams and security threats

A look at the Dirty Dozen tax scams and ways to protect taxpayer information.

TECHNOLOGY Q&A

How to create maps in Excel 2016

Microsoft Excel 2016 has two new mapping capabilities. J. Carlton Collins, CPA, demonstrates how to make masterful 2D and 3D maps in Excel 2016.

QUIZ

News quiz: IRS enforcement, a hot job, and audit value

The IRS’s 2016 Data Book, a “hot job” of particular interest at this time of year, and insight into how executive and audit committees view the insights from financial statement audits received attention recently. See how much you know with this short quiz.