Alice Scarlett Baker Holly Gordon Sunny Patel Lindsay Runnels Tiffany Vo

The Accounting Standards Codification includes several definitions of a nonpublic entity and a public entity that the FASB established to address specific types of issues over the years. Now the FASB wants to create a single definition for a non-public entity.

 8 Board meetings from March 7th 2012 October 30th 2013 57 comment letters were received. Currently listed as a Final Document on the FASB Project Roster The Board has completed deliberations and the staff will begin drafting a final Accounting Standards Update

 FASB considered:
Definition based on what elements establish a public entity How to distinguish amongst the variations solely for standard setting purposes Which entities are to be excluded from the Private Company Decision-Making Framework Determining if the differences between non-for-profit entities are relevant How the differences amongst the variations of non-for-profits would be made

A business entity (which excludes a not-for-profit entity within the scope of Topic 958 or an employee benefit plan within the scope of Topics 960 through 965 on plan accounting) meeting any one of the following criteria would be considered public; 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.

 The creation of a more specific definition for a public entity will not be very influential on the financial statements already required by GAAP Will affect how non-public entities will report their financial status in the future Will make the Private Company Decision Making Framework more efficient Helps create financial documents based on the needs of the end user

Public Company Private

Generally Accepted Accounting Principles (GAAP) Private Company Decision-Making Framework

 Most comment letter writers agree that a single definition of a public business entity instead of several definitions would create simplicity The proposed single definition of a public business entity would eliminate the inconsistency of having multiple definitions of a nonpublic entity and public entity within US GAAP( Institute of Management Accountants Comment Letter). Theories:
Comparability Understandability

 Customized for the end users of the financial documents based on if the company is public or a non-public entity Our agreement is based in part on the concept that financial statements intended to be released to the public at large differ significantly from those intended to be released to a limited, and perhaps controlled, number of parties, even if the number of recipients is relatively large. Further, if there exists a legal or regulatory requirement for public availability, presumably the underlying reason is based on a determined need for the public at large to have access. (Grant Thornton LLP Comment Letter) Theory
Implementation constraint of cost

 Against defining a not-for-profit entity with public and non-public entities "As a not-for-profit, member owned financial cooperative, Fort Knox Federal Credit Union believes it is important to recognize that inherent differences do indeed exists between publicly traded companies and not-for-profit entities such as credit unions. For example, unlike most traditional financial institutions, credit unions do not have the ability to issue stock, offer subordinated debt instruments to build capital or pay dividends to outside stockholders" (Comment Letter Fort Knox Federal Credit Union). Theory
Comparability

 Some companies that werent public before may end up becoming public under new definition "It appears that the five criteria in the proposed definition could result in more entities being considered public entities than under definitions that currently exist in the Accounting Standards Codification. It also appears that some of these entities would continue to be considered nonpublic under existing SEC guidance. Consequently, the benefits of reducing the overall cost and complexity of accounting and financial reporting for nonpublic entities by applying alternatives provided by the PCC and the FASB for those entities would reach a much smaller group of entities than might be anticipated by some constituents " (Comment Letter Ernst & Young). Theory
Implementation constraint of cost

Where will the new definition be located? A) Private Company Decision Making Framework B) Generally Accepted Accounting Principles C) Accounting Standards Codification D) Accounting Terminology Guide

"Board Meeting Handout 10/30/13." FASB . N.p., 30 October 2013. Web. 24 Nov 2013. http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827845128&blobheader=application%2Fpdf&blobheaderna me2=Content-Length&blobheadername1=Content-Disposition&blobheadervalue2=194340&blobheadervalue1=filename%3DDNPE-bmho20131030.pdf&blobcol=urldata&blobtable=MungoBlobs Broker-Dealers and Certain Registered Investment Advisors Comment Letter. FASB. 5 July 2013. Web. 24 Nov. 2013 http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175827845128&blobheader=application%2Fpdf&blobcol=urldata&blobtable=Mung oBlobs California and Nevada Credit Union Leagues Comment Letter. FASB. 19 Sep. 2013. Web. 24 Nov. 2013 http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827649619&blobheader=application%2Fpdf&blobheaderna me2=Content-Length&blobheadername1=ContentDisposition&blobheadervalue2=259388&blobheadervalue1=filename%3DDNPE.ED.0010.CALIFORNIA_AND_NEVADA_CREDIT_UNION_LEA GUES_DIANA_R._DYKSTRA.pdf&blobcol=urldata&blobtable=MungoBlobs Comment Letter Fort Knox Federal Credit Union. FASB. 5 Sep. 2013. Web. 24 Nov. 2013 http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827593405&blobheader=application%2Fpdf&blobheaderna me2=Content-Length&blobheadername1=ContentDisposition&blobheadervalue2=257921&blobheadervalue1=filename%3DDNPE.ED.0002.FORT_KNOX_FEDERAL_CREDIT_UNION_RAMON A_BUCHANAN.pdf&blobcol=urldata&blobtable=MungoBlobs Institute of Management Accountants Comment Letter. FASB. 19 Sep. 2013. Web. 24 Nov. 2013 http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827649619&blobheader=application%2Fpdf&blobheaderna me2=Content-Length&blobheadername1=ContentDisposition&blobheadervalue2=259388&blobheadervalue1=filename%3DDNPE.ED.0010.CALIFORNIA_AND_NEVADA_CREDIT_UNION_LEA GUES_DIANA_R._DYKSTRA.pdf&blobcol=urldata&blobtable=MungoBlobs Ernst and Young Comment Letter. FASB. 18 Sep. 2013. Web. 24 Nov. 2013 http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827645637&blobheader=application%2Fpdf&blobheaderna me2=Content-Length&blobheadername1=ContentDisposition&blobheadervalue2=485609&blobheadervalue1=filename%3DDNPE.ED.0007.IMA_FRC_NANCY_J._SCHROEDER.pdf&blobcol=ur ldata&blobtable=MungoBlobs Grant Thornton LLP Comment Letter. FASB. 19 Sep. 2013. Web. 24 Nov. 2013 http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827649587&blobheader=application%2Fpdf&blobheaderna me2=Content-Length&blobheadername1=ContentDisposition&blobheadervalue2=325344&blobheadervalue1=filename%3DDNPE.ED.0011.GRANT_THORNTON_LLP.pdf&blobcol=urldata&blob table=MungoBlobs Minutes Template. FASB. 31 Oct. 2013. Web. 24 Nov. 2013. http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827866005&blobheader=application%2Fpdf&blobcol=urldat a&blobtable=MungoBlobs.