GAAP Update to Accounting for Variable Interest Entities– April 07, 2014 by Jami Blake

On March 20, 2014, the Financial Accounting Standards Board (FASB) issued an update to existing generally accepted accounting principles (GAAP). The update is specific to private companies and provides an alternative for accounting in the area of variable interest entities (VIE). It impacts those entities that would have previously had to apply VIE guidance to lessor companies under common control. This update provides an option for private companies to elect not to apply VIE guidance when specific criteria apply. The alternative will be effective for annual periods beginning after December 15, 2014; however, early adoption is permitted, and, if elected, may impact financial statements currently being issued for the 2013 year.

This standard is yet another way the FASB is attempting to address the needs of private companies, particularly to simplify the process and minimize the costs associated with the complexity of complying under current GAAP. As this standard was just recently released, there are still many questions about and nuances to applying it. And, of course, circumstances can vary significantly from client to client. If you are interested in learning more about the new update, potentially for your 2013 reports, contact Jami Blake or a member of your service team.

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