Businesses have been intensely focused on dealing with additional regulation surrounding variable interest entities (VIEs) since the fallout from Enron and other accounting scandals. For nonpublic companies, this has meant working through complex accounting rules to determine whether or not certain related-party entities need to be consolidated. FASB, with input from stakeholders and advice from the Private Company Council, has tried to improve and simplify accounting requirements for private company reporting in recent years.
Accordingly, in October 2018 FASB issued Accounting Standards Update (ASU) 2018-17, Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities. The changes in ASU 2018-17 supersede and expand on ASU 2014-07, Consolidation: Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements. Whereas ASU 2014-17 was limited to lease arrangements with commonly controlled entities, the private company accounting alternative allowable under 2018-17 expands the scope to all qualifying common control arrangements.
The private company accounting alternative applies to all entities except for public business entities, not-for-profit entities and employee benefit plans, as defined.
Specifically, the new standard:
Work with your accounting advisors to:
Please contact a member of your service team for further discussion.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.
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