By Matt Rosen
The Private Company Council (PCC), with endorsement from the FASB board, has made a proposed accounting standard update available for comment which would remove the variable interest entity (VIE) reporting requirements for certain situations involving private companies. The proposed standard would allow private companies who enter into leasing arrangements with a commonly controlled lessor to exclude the lessor entity from VIE treatment, thus relieving the entity from the requirement to include the lessor in their financial statements. The election would only be available if substantially all activity between the entities is related to the leasing activity.
The PCC, on which Barnes Dennig Director Tom Groskopf serves as a Council Member, has made VIE accounting one of its main agenda items since being formed. The goal of the proposed change is to have the financial statements of private companies better reflect the information that lenders and other users in their analysis of the company’s financial position. Through discussions with stakeholders the PCC concluded that the related costs of applying VIE treatment to commonly controlled lessors was not justified in the benefits provided, noting that users often reverse the effects of the consolidation in their analysis of the statements.
The proposal is available for comment until October 14, 2013 and can be found at the below link: