Aquestion of standards: pronouncements ot the private company council.

• Author: Dauberman, Mark

The battle between the accounting profession and standard

setters over "Little GAAP" has existed for more than hall' a century. In one of the earliest public outcries lor Little GAAP, accounting professionals challenged the necessity of provisions within Accounting Principles Board Opinion No. 3. which served as the predecessor to today's statement of cash Hows. With added requirements related to accounting for leases, deferred taxes and other areas, the protests increased.

Fast forward to the second decade of the 21st century and GAAP, in the form of FASB Accounting Standards Codification (ASC), is estimated to be 23,000 pages if printed. Meanwhile the clamor for Litde GAAP has gotten louder.

The standard setters are finally responding. The FASB created the Private Company Council PCCi, which is to evaluate existing GAAP and determine if there are accounting practices or disclosures thai might be eliminated, reduced or otherwise modified lor nonpublic entities.

The FASB has issued three Accounting Standards Updates ASl 's) for nonpublic companies, all of which are effective for periods beginning after Dec. 15, 2014, with early application permitted. The updates providing alternative accounting approaches for nonpublic entities are:

* ASU 2014-02, Topic 350: Intangibles Goodwill and Other: Accounting for Goodwill

* ASU 2014-03. Topic 815: Derivatives and Hedging: Accouning for Certain Receive variable, Pay-fixed Interest Rate Swaps Simplified Hedge Accounting Approach

* ASU 2014-07, Topic 810: Consolidation: Applying Variable Interest Entities Guidance to Common Control Leasing, A rrangements

An entity seeking to apply die alternative accounting approaches will determine if it is nonpublic by referring in the definition of a public entity in the ASC. A public business entity is defined as one that is:

* Either required to. or does, provide financial statements to the SEC. or is required by the Securities and Exchange Act of 1934 to lile its financial statements with another regulatory agency:

* Required to provide financial statements to a foreign regulator to sell or issue securities that are not restricted from transfer by contract:

* An issuer of, or conduit bond obligor lor, securities traded, listed or quoted on an exchange or an over-the-counter market; and

* Required by law, contract or regulation to make U.S. GAAP financial statements available to the public and has one or more securities that are not restricted from transfer by contract.

A nonpublic entity deciding to adopt one or more of the alternative...