Big GAAP or Little GAAP? Ongoing discussions in accounting, which have centered on the creation of “Big GAAP” (Generally Accepted Accounting Principles) for larger, publicly traded companies, and “Little GAAP” for small- and medium-size businesses, necessitated a definition as to what exactly constitutes a “public business entity.”
The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) Number 2013-12, Definition of a Public Business Entity. The “public business entity” criteria will be used in the future for determining whether an entity can apply “Little GAAP.” Entities not deemed to be public business entities could be eligible to apply alternative accounting and reporting guidance approved by the Private Company Council (PCC).
The ASU specified several criteria that must be considered to determine whether an entity is, or is not, a public business entity:
- An entity that is required by the Securities and Exchange Commission (SEC) to file or furnish financial statements to the SEC is considered to be a public business entity.
- A consolidated subsidiary of a public company is not considered a public business entity for purposes of its stand-alone financial statements other than those that are included in an SEC filing by its parent or by other registrants, or those that are issuers and are required to file or furnish financial statements with the SEC.
- A business entity that has securities not subject to contractual restrictions on transfer AND that is by law, contract, or regulation required to prepare U.S. GAAP financial statements (including footnotes) and make them publicly available on a periodic basis is considered to be a public business entity.
Excluded from the definition of a public business entity under this ASU are not-for-profit entities (NFPs) and employee benefit plans. NFPs will be considered for future GAAP alternatives on a standard-by-standard basis. Previously, NFPs which were “conduit debt obligors” were considered “public entities.”
To discuss how the professionals at PYA can assist your business, please contact the experts listed below at PYA, (800) 270-9629.
