FASB issues proposal for consolidation of VIEs

The objective is to reduce cost and complexity.

FASB proposed an Accounting Standards Update (ASU) designed to simplify and improve financial reporting associated with consolidation of variable-interest entities (VIEs).

Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities seeks to reduce cost and complexity and is based on recommendations from the Private Company Council (PCC).

Under the proposed update, a private company (reporting entity) would not have to apply VIE guidance to legal entities under common control, including common-control leasing arrangements, if neither the parent nor the legal entity being evaluated for consolidation is a public business entity.

Comments on the exposure draft, available on FASB's website, are due by Sept. 5.

Accounting for certain financial instruments: Following a PCC recommendation, FASB issued a new standard that simplifies the accounting for certain financial instruments with down round features.

The provisions in Accounting Standards Update No. 2017-11 related to down rounds take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2018. For all other organizations, the amendments take effect for fiscal years beginning after Dec. 15, 2019, and interim periods within fiscal years beginning after Dec. 15, 2020. Early adoption is permitted for all organizations.

Bad debt and steamships: Two new proposals from FASB are designed to make technical corrections to its Accounting Standards Codification. With the proposals, FASB:

  • Aims to supersede outdated deferred tax guidance on bad debt reserves of savings and loans that arose after Dec. 31, 1987.
  • Intends to supersede Topic 995, U.S. Steamship Entities, because the board does not consider its guidance relevant anymore.

The comment period for both proposals closed Aug. 28.

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