Based on inquiries to the Financial Accounting Standards Board (FASB) on which entities will be within the scope of the draft Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies (the “Guide”), FASB has issued proposed guidance on the definition of public business entities.
The primary purpose of the proposed ASU would be to:
- amend the FASB Accounting Standards Codification to include one definition of a public entity and
- identify the type of entities that would be excluded from the Private Company guidance.
Of particular relevance is the fact that the new definition would specifically exclude not-for-profit (NFP) entities as being defined as either public or private. Instead, the board would consider user needs and NFP resources, on a standard-by-standard basis, when determining whether all, none, or only some NFPs will be eligible to apply accounting and reporting alternatives within US GAAP for private companies.
Currently, NFPs who issue conduit debt (including many colleges and universities) are considered public entities for financial reporting purposes under US GAAP. This proposed ASU will eliminate the public vs. private distinction in NFPs when applying future accounting and reporting guidance. The ASU is not expected to affect existing standards and related disclosure requirements. Independent institutions of higher education are encouraged to submit comments on the proposed ASU by September 17 and to continue to follow news related to this issue.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.