FASB votes to remove DSE concept from U.S. GAAP and amend the consolidation requirements

Published on: 27 Feb 2014

At today’s meeting, the FASB voted to remove the concept of a development-stage entity (DSE) from U.S. GAAP.1 Specifically, the FASB voted to:

  • Remove ASC 9152 in its entirety from the FASB Accounting Standards Codification.
  • Delete the guidance in ASC 8103 on how to assess whether a DSE has sufficient equity at risk in the evaluation of whether the DSE is a variable interest entity.
  • Clarify that all entities, including entities that have not begun operations, should provide the risk and uncertainty disclosures required in ASC 275.4

The FASB instructed its staff to draft an Accounting Standards Update (ASU) reflecting the Board’s decision. The ASU will be applied retrospectively and will be effective for public business entities in interim and annual periods beginning after December 15, 2014. The requirements will be effective for nonpublic business entities for annual periods beginning after December 15, 2014, and interim and annual periods thereafter. However, both public and nonpublic entities will have additional time to adopt the amendments to ASC 810. All entities will be permitted to early adopt the standard.


1    Under current U.S. GAAP, a DSE is defined as follows:

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.

2     FASB Accounting Standards Codification Topic 915, Development Stage Entities.

3    FASB Accounting Standards Codification Topic 810, Consolidation.

4    FASB Accounting Standards Codification Topic 275, Risks and Uncertainties.

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