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Journal Entry — FASB to Issue Exposure Draft on Definition of Public Business Entity

Published on: Jul 11, 2013

At its meeting this week, the FASB decided to issue an exposure draft (ED) on the definition of “public business entity,” which was developed in conjunction with the Private Company Council (PCC) in establishing the scope of guidance being proposed under the private-company decision-making framework (PCDMF). Earlier this month, the FASB issued three proposals with alternative accounting options for private companies. Each proposal included a question for respondents regarding the proposed definition of a public business entity. However, the FASB has now decided to separately expose this definition for comment.

By defining a public business entity, the forthcoming ED will establish the scope of alternative accounting under the PCDMF by specifying which entities are not permitted to use the various options offered. As noted in the summary of decisions for the FASB’s June 6 meeting, a business entity that satisfies any of the following criteria would be considered a public company:

  • “It is required to file or furnish financial statements with the Securities and Exchange Commission.”
  • “It is required to file or furnish financial statements with a regulatory agency in preparation for the sale of securities or for purposes of issuing securities.”
  • “It has issued or is a conduit bond obligor for unrestricted securities that can be traded on an exchange or an over-the-counter market.”
  • “Its securities are unrestricted, and it is required to provide U.S. GAAP financial statements to be made publicly available on a periodic basis pursuant to a legal or regulatory requirement.”

During deliberations at the meeting this week, the Board observed that there are already multiple definitions of public entity in the FASB Accounting Standards Codification but decided that, to avoid unintended consequences, the proposed definition would not supersede those existing definitions. Therefore, the proposed definition would affect only the scope of the proposals issued under the PCDMF, including the three PCC-related proposals currently out for comment.

The FASB plans to request feedback on the proposed definition before the PCC’s next meeting on September 30, 2013. Comments on this and the other PCC-related proposals will be discussed at that meeting.

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