Share this content
financial accounting
vetkit/iStock

FASB Removes Effective Dates From PCC Alternatives

by
Mar 8th 2016
Share this content

A new standard issued by the Financial Accounting Standards Board (FASB) on March 7 erases the effective dates from the four private company accounting alternatives in US GAAP and allows private companies to forgo a preferability assessment the first time they elect an accounting alternative.

Accounting Standards Update (ASU) No. 2016-03, Effective Date and Transition Guidance, also indefinitely extends the transition guidance in the four alternatives, which were created by the Private Company Council (PCC) and included in ASUs the FASB issued in 2014.

Previously, if a private company elected to adopt an accounting alternative after its effective date, it had to assess whether the accounting alternative was preferable to its accounting policy at that time.

Forgoing an initial preferability assessment allows private companies to adopt an accounting alternative when they experience a change in circumstances or management’s strategic plan, according to the FASB. It also allows private companies that were unaware of an accounting alternative to adopt it without having to bear the cost of justifying preferability.

The PCC, which advises the FASB on possible alternatives within US GAAP that address the needs of private company financial statement users, voted last December in favor of the proposal.

The four ASUs that contain PCC alternatives include:

  • ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350).
  • ASU No. 2014-03, Derivatives and Hedging (Topic 815).
  • ASU No. 2014-07, Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements.
  • ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination.

The new standard makes the guidance in the four alternatives effective immediately by removing their effective dates.

Any subsequent change to an accounting policy election requires justification that the change is preferable under Topic 250, Accounting Changes and Error Corrections.

Related article:

PCC Votes to Remove Effective Dates From 4 Accounting Standards

Tags:

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.