FASB and PCC Finalize GAAP Framework for Private Companies

A variable interest entity is an organization in which consolidation is not based on a majority of voting rights. The disclosures to be provided under the alternative would better align the information that lenders and other users of private company financial statements typically use in assessing the cash flows of a reporting entity.
 
The PCC's decision to move forward with the proposal is the first step in a process toward exposure by the FASB. A detailed proposal will be drafted by FASB staff, which will be discussed by the board in the coming weeks. If the proposal is endorsed, it will be issued for public comment as a proposed accounting standards update, according to the FASB.
 
"In advancing the PCC's fourth accounting standards proposal, the PCC is making significant progress in tackling issues top of mind for users, preparers, and auditors of private company financial statements," PCC Chairman Billy Atkinson said in a written statement.
 
In June, the American Institute of CPAs (AICPA) introduced the Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs), a non-US GAAP framework for private company financial reporting.
 
The AICPA has stated that the framework complements the efforts made by the FASB and the PCC to modify US GAAP for private companies.
 
The purpose of the FRF for SMEs is to help small businesses prepare financial statements that clearly and concisely report what a business owns, what it owes, and its cash flow, according to the AICPA.
 
The AICPA will be working with the National Association of State Boards of Accountancy (NASBA) on a decision-making tool that will help small businesses decide whether the FRF for SMEs is right for them.
 
"The AICPA and NASBA are committed to engaging in an effort to ensure that the FRF for SMEs, as a nonauthoritative framework, is not confused with GAAP and that entities that utilize GAAP or a non-GAAP solution do so in a suitable and transparent manner," the AICPA and the NASBA said in a joint statement on July 15.
 
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