NEWS RELEASE 03/07/12
FASB Chairman Adds an Agenda Project on Defining "Nonpublic
Entities"
Norwalk, CT, March 7, 2012—The Financial
Accounting Standards Board (FASB) has added to its agenda a project to
re-examine the definition of a "nonpublic entity." The decision by FASB Chairman
Leslie F. Seidman to add the agenda project was based on comments from
stakeholders requesting clarification of the existing definitions and ongoing
questions about which definition of a nonpublic entity was being used in various
projects.
When providing feedback, stakeholders specifically questioned
which nonpublic entities will qualify for practical expedients, reduced
disclosures, and deferred effective dates. The FASB identified a similar need
for clarity on the definition of a nonpublic entity with respect to the scope of
the Private Company Decision-Making Framework that the FASB staff has been
developing with the help of a resource group composed of private company
stakeholders.
The project will focus on defining what constitutes a
private company to distinguish between different types of entities for
standard-setting purposes. An additional goal of the project will be to
determine which companies are to be included in the scope of the Private Company
Decision-Making Framework that is being developed. The FASB will also evaluate
whether any changes that result from a consistent definition should be applied
prospectively or retrospectively to affected accounting standards.
"The
FASB Accounting Standards Codification® includes several definitions of
private companies that the FASB established to address specific types of issues
over the years, including the scope of a standard, differences in accounting or
disclosure requirements, and different effective dates," stated Ms. Seidman.
"The FASB identified an opportunity to simplify the definition of a nonpublic
entity and to address a few known practice issues. This project will also help
us identify the scope of entities that would be considered in future discussions
about potential differences in requirements for nonpublic entities."
The
FASB staff, with the help of a resource group, has been developing a set of
decision criteria (the Private Company Decision-Making Framework) to assist the
Board in making decisions about whether and when to modify the requirements for
recognition, measurement, presentation, disclosure, effective dates, and
transition methods for financial accounting standards that apply to private
companies. The FASB staff plans to issue a discussion document for public
comment in the second quarter, but would not plan to finalize the framework
until the Financial Accounting Foundation (FAF) has made a decision about its
Plan to Improve Standard Setting for Private Companies, and any new Council has
an opportunity to evaluate and agree with the proposed framework.
The
FASB Accounting Standards Codification® reorganizes the thousands of
U.S. GAAP pronouncements, excluding governmental accounting standards, into
roughly 90 accounting Topics and displays all Topics using a consistent
structure. It also includes relevant Securities and Exchange Commission (SEC)
guidance that follows the same topical structure in separate sections in the
Codification.
More information about the agenda project is available on
the Nonpublic
Entity Resources page.
About the Financial
Accounting Standards Board
Since 1973, the Financial Accounting
Standards Board has been the designated organization in the private sector for
establishing standards of financial accounting and reporting. Those standards
govern the preparation of financial reports and are officially recognized as
authoritative by the Securities and Exchange Commission and the American
Institute of Certified Public Accountants. Such standards are essential to the
efficient functioning of the economy because investors, creditors, auditors, and
others rely on credible, transparent, and comparable financial information. For
more information about the FASB, visit our website at www.fasb.org.