FASB expands private company consolidation relief
 

FASB expands private company consolidation relief

FASB addressed an area of accounting that has long been a concern for private companies Wednesday with the issuance of a standard designed to improve consolidation accounting for private companies.

The standard-setting board also amended for all entities the guidance for determining whether a decision-making fee is a variable interest.

The changes were published in Accounting Standards Update No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The standard is designed to reduce the cost and complexity of financial reporting associated with variable-interest entities (VIEs), which are organizations in which consolidation is not based on a majority of voting rights.

Responding to concerns voiced through the Private Company Council, FASB in 2014 provided some relief by giving private companies the ability to elect not to consolidate VIEs in common control leasing arrangements.

The guidance issued Wednesday expands and supersedes the 2014 private company exception, permitting the exception to be applied to all qualifying common control arrangements for private companies.. Read more on the Journal of Accountancy.