Private Companies May Finally Receive Some Relief

At its most recent meeting, the Financial Accounting Standards Board (FASB) voted to endorse the Private Company Council’s (PCC) proposal to exempt private companies from certain provisions of the variable interest entity (VIE) guidance under generally accepted accounting principles.

The PCC’s proposal would allow a private company lessee to not have to assess whether it should consolidate the lessor entity when all of the following conditions are met:

  • The private company and legal entity are under common control.
  • The private company has a lease arrangement with the legal entity.
  • Substantially all activities between the private company and the legal entity are related to the leasing activities (including supporting leasing activities) of the legal entity.

A private company applying the proposed alternative within GAAP would be required to provide the following additional disclosures:

  • The key terms of the leasing arrangements.
  • The amount of debt and/or significant liabilities of the lessor entity under common control.
  • The key terms of existing debt agreements of the lessor under common control, such as amount of debt, interest rate, maturity, pledged collateral and guarantees.
  • The key terms of any other explicit interest in the lessor entity.

An entity would be required to apply this alternative approach to all of its leasing arrangements that meet the requirements for applying this approach. Full retrospective treatment would be applied under this alternative.

An exposure draft on is expected to be issued in late August, with the comment period running through October 14. 

© 2013 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

our thoughts on

array(1) { [0]=> string(2) "21" }
Audit BY Adam Goode
Is It Time to Overhaul the Income Statement?
SEC Issues Final Ruling to Modernize and Simplify Regulation S-K
PCAOB Inspections Outlook for Audit Committees
It's Budget Season Again!
Preparing for Enhanced Disclosure: Liquidity and Availability
Audit, ERISA BY Joshua Zimmerly
Benefit Plan Audit by Infomercial

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office

One PPG Place, Suite 1700
Pittsburgh, PA 15222
p:412.261.3644     f:412.261.4876

Map of Columbus Office

65 East State Street, Suite 2000
Columbus, OH 43215
p:614.621.4060     f:614.621.4062