During the final years of development of the revenue standard, the FASB was under pressure from the AICPA and others regarding the establishment of U.S. GAAP for nonpublic entities. Specifically, some criticized the FASB for setting standards for large public companies that increase the complexity (and, therefore, the cost) associated with producing financial statements. As a result, the Financial Accounting Foundation, the FASB’s parent organization, created the Private Company Council to help the FASB determine when there should be differences in U.S. GAAP for nonpublic entities (see Deloitte’s May 25, 2012, journal entry and June 5, 2012, Heads Up for more information). Accordingly, throughout the redeliberations and final development of the revenue standard, the FASB considered the disparate needs of users of nonpublic entities’ financial statements. Ultimately, the FASB concluded that no specific recognition or measurement differences for nonpublic entities were necessary. However, the Board also concluded, largely on the basis of feedback from the nonpublic-entity community, that differences in the required disclosure package and mandatory effective date of the revenue standard would be appropriate for nonpublic entities. In addition, after the revenue standard was finalized, the FASB decided to provide recognition exceptions for franchisors that are not public business entities (“private-company franchisors”) by issuing ASU 2021-02, which allows private-company franchisors to use a practical expedient and a policy election when identifying performance obligations in their contracts with customers (i.e., franchisees) under ASC 606. See Section 5.3.5 for additional details.
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