United States

Some PBEs may use private company effective dates for ASC 606 and 842

FINANCIAL REPORTING INSIGHTS  | 

During a meeting of the Financial Accounting Standards Board (FASB) Emerging Issues Task Force on July 20, 2017, the SEC Observer announced that the SEC staff would not object to a public business entity (PBE) that otherwise would not meet the definition of a PBE except for the requirement to include, or the inclusion of, its financial statements or financial information in another entity’s SEC filing adopting:

  • Topic 606 of the FASB’s Accounting Standards Codification (ASC), Revenue from Contracts with Customers, for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019; and
  • ASC 842, Leases, for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

This SEC staff announcement allowing such PBEs to use the effective dates for private companies when they adopt ASC 606 and ASC 842 does not preclude these entities from electing to adopt ASC 606 and ASC 842 according to the PBE effective dates per the respective standard.

The SEC’s announcement is only applicable to a PBE that otherwise would not meet the definition of a PBE except for the requirement to include, or the inclusion of, its financial statements or financial information in another entity’s SEC filing, which our firm believes would encompass:

  • Entities whose financial statements are included in another entity’s SEC filing because they are significant acquirees under Regulation S-X Rule 3-05
  • Significant equity-method investees under Regulation S-X Rule 3-09
  • Equity-method investees whose summarized financial information is included in a registrant’s SEC filing under Regulation S-X rule 4-08(g)

The SEC’s announcement is not applicable to other public entities and should not be used by analogy to situations not discussed above.