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Journal entry — FASB eliminates DSE concept from U.S. GAAP

Published on: Jun 11, 2014

Yesterday, the FASB issued ASU 2014-10,1 which eliminates the concept of a development stage entity2 (DSE) from U.S. GAAP and removes:

  • ASC 9153 in its entirety, which contained presentation and disclosure requirements specific to DSEs (e.g., inception-to-date information).
  • The guidance in ASC 810 on evaluating whether a DSE has sufficient equity at risk (one of the criteria used in determining whether an entity is a variable interest entity).

The ASU also clarifies that the disclosure requirements in ASC 275 (i.e., disclosures about risks and uncertainties) apply to entities that have “not commenced planned principal operations.” 

As the FASB explains in the ASU, users of DSE financial statements do not find “the [DSE] distinction, the inception-to-date information, and certain other disclosures currently required [by DSEs to be] decision useful.”

Except for the amendments to ASC 810, the ASU is effective for public business entities for reporting periods (including interim periods) beginning after December 15, 2014. For other entities, these amendments are effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. The amendments to ASC 810 are effective one year later for public business entities and two years later for other entities. Early adoption of the amendments is permitted for “any annual reporting period or interim period for which the entity’s financial statements have not yet been issued.”

For more information, see the FASB's press release.

Editor’s Note: An entity may elect to adopt the ASU earlier than the required adoption date to avoid the requirements to present inception-to-date information and certain other disclosures. Although the entity would no longer be considered a DSE for its financial statement reporting, an investor in the DSE could continue to apply the DSE-specific guidance in ASC 810 until the investor adopts the ASU’s amendments.


1 FASB Accounting Standards Update No. 2014-10, Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.

2 The FASB Accounting Standards Codification Master Glossary defines a DSE as “an entity devoting substantially all of its efforts to establishing a new business and for which either of the following conditions exists: (a) planned principal operations have not commenced; (b) planned principal operations have commenced, but there has been no significant revenue therefrom.”

3 For titles of FASB Accounting Standards Codification references, see Deloitte’s "Titles of Topics and Subtopics in the FASB Accounting Standards Codification."

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