Private Company Decision-Making Framework
The Private Company Decision-Making Framework ("the Guide") was developed to assist the FASB and the PCC in determining whether — and in what circumstances — to provide alternative recognition, measurement, disclosure, display, effective date or transition guidance for private companies reporting under US GAAP.
"Th[e] Guide provides considerations for the PCC and the Board in making user-relevance and cost-benefit evaluations for private companies under the existing conceptual framework. The Guide is intended to be a tool to help the Board and the PCC identify differential information needs of users of public company financial statements and users of private company financial statements and to identify opportunities to reduce the complexity and costs of preparing financial statements in accordance with U.S. GAAP."
Definition of a Public Business Entity
The FASB issued ASU 2013-12, Definition of a Public Business Entity: An Addition to the Master Glossary, in conjunction with the Guide. The ASU allows the FASB, PCC, and EITF to determine (1) what companies will be included in the scope of the Guide and (2) the scope of new financial accounting and reporting guidance.
The ASU does not contain an effective date; however, an entity would apply the definition of a public business entity in connection with its adoption of the first ASU that uses the term.
According to the final ASU:
A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity.
a. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing).
b. It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC.
c. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer.
d. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market.
e. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including footnotes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion.
An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity’s filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC.
For more information on the Guide and the ASU, see Deloitte's Accounting Journal Entry and the FASB's website for its: