In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-02, Consolidation (Topic 810) Amendments to the Consolidation Analysis. This ASU was issued in response to users’ concerns regarding current guidance, which could require a reporting entity to consolidate another entity when the contractual rights of the reporting entity do not give it the ability to act primarily on its own behalf. Often, as a result, entities are required to issue consolidated financial statements when users really want to see “stand alone” financial results.
While the entire ASU should be reviewed for its implications in specific circumstances, this new guidance places an emphasis on evaluating variable interests with a focus on the risk of loss when determining if a controlling financial interest exists. The following is a brief summary of how the ASU differs from current generally accepted accounting principles (GAAP):
The ASU will be effective for periods beginning after December 15, 2015, for public companies and one year later for private companies and not-for-profit organizations.
If you have any additional questions, contact the expert listed below at PYA, (800) 270-9629.