FASB expands private company consolidation relief

The guidance supersedes the 2014 private company exception.

FASB addressed an area of accounting that has long been a concern for private companies with the recent issuance of a standard designed to improve consolidation accounting for private companies.

The standard-setting board also amended for all entities the guidance for determining whether a decision-making fee is a variable interest.

The changes were published in Accounting Standards Update No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The standard is designed to reduce the cost and complexity of financial reporting associated with variable-interest entities (VIEs), which are organizations in which consolidation is not based on a majority of voting rights.

Responding to concerns voiced through the Private Company Council, FASB in 2014 provided some relief by giving private companies the ability to elect not to consolidate VIEs in common control leasing arrangements.

The new guidance expands and supersedes the 2014 private company exception, permitting the exception to be applied to all qualifying common control arrangements for private companies.

The new standard gives a private company the option, when certain criteria are met, to make an accounting policy election to not apply VIE guidance to legal entities under common control (including common control leasing arrangements).

The ASU takes effect for organizations other than private companies in fiscal years beginning after Dec. 15, 2019, and interim periods within those fiscal years. The amendments take effect for private companies for fiscal years beginning after Dec. 15, 2020, and interim periods within fiscal years beginning after Dec. 15, 2021. Early adoption is permitted.

SPONSORED REPORT

Get your clients ready for tax season

These year-end tax planning strategies address recent tax law changes enacted to help taxpayers deal with the pandemic, such as tax credits for sick leave and family leave and new rules for retirement plan distributions, as well as techniques for putting your clients in the best possible tax position.

RESOURCES

Keeping you informed and prepared amid the coronavirus crisis

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.