FASB issues proposed ASU on the definition of a public business entity

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07 Aug 2013

The FASB released for public comment a proposed ASU, 'Definition of a Public Business Entity', that would (1) amend the Codification Master Glossary to define the term “public business entity” under U.S. GAAP and (2) clarify the types of organizations that would be outside the scope of the Private Company Decision-Making Framework (PCDMF) once it is finalized.

The proposed ASU defines a public business entity as an organization that meets any of the following criteria:

  1. 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, with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing).
  2. It is required by the Securities Exchange Act of 1934, as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency.
  3. 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.
  4. It has (or is a conduit bond obligor for) unrestricted securities that are traded or can be traded on an exchange or an over-the-counter market.
  5. 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.

Entities that meet this definition would not be eligible to elect the accounting and reporting alternatives developed by the Private Company Council (PCC). In addition, the proposed ASU indicates that not-for-profit organizations and employee benefit plans (within the scope of ASC 960, ASC 962, and ASC 965) would be outside the scope of the PCDMF. However, the FASB will evaluate on a standard-by-standard basis whether the accounting alternatives developed by the PCC would apply to such entities.

The proposed ASU would not supersede any existing definitions of “nonpublic entity” or “public entity” in the Codification Master Glossary. However, the PCC, FASB, and EITF would consistently use this proposed definition in their future standard-setting activities when the distinction is necessary. 

Comments on the proposed ASU are due by September 20, 2013. For more information about the proposal, see Deloitte's Heads Up newsletter or the FASB In Focus on the FASB Web site.

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