FASB eliminates effective dates for private company alternatives

Written by promotiondept

November 13, 2018

FASB elmnates effectve dates for prvate company alternatves

A new fnancal reportng standard ssued by FASB on Monday wll allow prvate companes to forgo a preferablty the frst tme they elect any of the four prvate company accountng alternatves.

The Prvate Company Councl (PCC) was the mpetus for the change n Accountng Uate (ASU) No. 2016-03, whch elmnates the effectve dates of the PCC alternatves that are contaned n:

The PCC voted n favor of the change, whch was endorsed by FASB, because of concerns that some prvate companes would not be able to elect the alternatves by ther effectve dates. Stakeholders were concerned that, prevously, the alternatves would have been unavalable to prvate companes that d a change after the effectve date that made the alternatves advantageous.

There also was a concern that prvate companes that were unaware of the alternatves untl after the effectve date would not have been able to elect them.

The new amennts make the prvate company alternatves effectve mmedately and remove ther effectve dates. They also nclude transton provsons that enable prvate companes to forgo a preferablty when they elect any of the accountng alternatves.

Any subsequent change to an accountng polcy electon requres justfcaton that the change s preferable under ASC Topc 20, Accountng Changes and Error Correctons.

The amennts also extend ndefntely the transton gudance n the four prvate company alternatves.

Ken Tysac (ktysiac@aicpa.org) s a JofA edtoral drector.


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