FASB AND PCC ISSUE PRIVATE COMPANY FRAMEWORK; FASB ISSUES DEFINITION OF
PUBLIC BUSINESS ENTITY
Known informally as the Guide, the Private Company
Decision-Making Framework is intended to assist the FASB and the PCC in
determining whether and when to provide alternative recognition, measurement,
disclosure, display, effective date, or transition guidance for private
companies reporting under U.S. generally accepted accounting principles (GAAP).
Norwalk, CT, December 23, 2013—The Financial Accounting
Standards Board (FASB) and the Private Company Council (PCC) today issued the
Company Decision-Making Framework: A Guide for Evaluating Financial Accounting
and Reporting for Private Companies. The FASB also issued FASB
Accounting Standards Update No. 2013-12, Definition
of a Public Business Entity: An Addition to the Master
The Definition of a Public Business Entity will be used by the
FASB, the PCC, and the Emerging Issues Task Force (EITF) to determine the scope
of new accounting and reporting guidance and to identify the types of companies
that are excluded from the scope of the Guide.
"The Guide and the
Definition of a Public Business Entity are integral parts of the FASB and the
PCC´s ongoing commitment to better serve the needs of both users and preparers
of private company financial statements," said FASB Chairman Russell G. Golden.
"The Guide will help the FASB and the PCC identify opportunities for private
companies to reduce the complexity and costs of preparing financial statements
in accordance with U.S. GAAP. Defining a public business entity will help
clarify the Guide´s scope, while also addressing stakeholder concerns with the
inconsistency and complexity of having multiple definitions of ‘nonpublic
entity´ and ‘public entity´ within GAAP."
PCC Chairman Billy M. Atkinson
said: "The Guide is intended to assist the PCC in identifying alternatives to
U.S. GAAP based on the needs of users and preparers of private company financial
statements. It should ensure that the quality of reported information remains
high for the benefit of all private company stakeholders and our capital
The Guide will be used by the Board and the PCC, along with the
existing FASB conceptual framework for financial reporting, in making
user-relevance and cost-benefit evaluations for private companies. It describes
five significant factors that differentiate the financial reporting
considerations of private companies from public companies.
The Guide also sets forth five areas (known as modules) where
financial accounting and reporting guidance might differ for private and public
- The number of primary financial statement users and their access to
- The investment strategies of primary users
- The ownership and capital structures
- Accounting resources, and
- The manner in which preparers learn about new financial reporting
The Definition of a Public Business
Entity amends the Master Glossary of the FASB Codification to include one
definition of public business entity for future use in U.S. GAAP. The definition
does not affect existing requirements.
- Recognition and measurement
- Display (presentation)
- Effective dates, and
- Transition method.
An assessment of whether an
organization is a public business entity is based on meeting any one of several
criteria including whether the entity is required to file or furnish financial
statements, or file or furnish financial statements (including voluntary filers)
with the U.S. Securities and Exchange Commission, or has securities that are
traded, listed, or quoted on an exchange or an over-the-counter
More information on the Guide and the Definition of a Public
Business Entity, including a video
In Focus, is available on the FASB
website and on the PCC
The FASB expects to issue final Accounting Standards Updates
on the first two PCC consensuses—on accounting for goodwill and on the
simplified hedge accounting approach for certain interest rate swaps—in January
About the Private Company Council (PCC)
determines alternatives to existing nongovernmental U.S. GAAP to address the
needs of users of private company financial statements, based on criteria
mutually agreed upon by the PCC and the FASB. Before being incorporated into
U.S. GAAP, PCC recommendations will be subject to a FASB endorsement process.
The PCC also serves as the primary advisory body to the FASB on the appropriate
treatment for private companies for items under active consideration on the
FASB´s technical agenda.
About the Financial Accounting Standards
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 http://www.fasb.org/.