The Private Company Council (PCC) voted on November 12, 2013 to finalize an alternative standard for applying variable interest entity (VIE) guidance to common control leasing arrangements.

Current GAAP requires a company to consolidate a VIE when it is considered the primary beneficiary in a common control leasing arrangement.  The proposed alternative standard, PCC Issue No. 13-02 Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements, would permit a private company to elect not to apply VIE guidance for assessing whether it should consolidate a lessor entity when (a) the lessor entity and the private company are under common control, (b) the private company has a leasing arrangement with the lessor entity, and (c) substantially all of the activity between the two entities is related to the leasing activity of the lessor entity.

The alternative standard would be retrospectively applied when elected, and applicable to all leasing arrangements that meet the above requirements.  In addition, the alternative standard would require additional disclosures about the lessor entity.

This change is subject to endorsement by the FASB before becoming effective.

Auditing & Accounting Standards Seminar

PCC member and Barnes Dennig Accounting & Auditing Director Tom Groskopf, CPA, CVA, MBA will share his insights into the changes that are forthcoming and how to prepare for them at our upcoming Accounting & Auditing Standards Seminar, scheduled for December 12, 2013.  Register today to hear Tom’s expert perspective on these important developments!