Implications of FASB’s Proposed Definition of Public Business Entity for Non-Profits

FASB-logoIn a recent article by the Journal of Accountancy, the publication spelled out changes of note in the definition of a “public business entity.” The FASB has proposed a definition for use in future standard setting that would exclude most NFPs from consideration as a public business entity.

The new definition would provide one consistent public business entity definition (versus the current three) for use in U.S. GAAP and would eliminate the public or nonpublic distinction between NFPs in setting future standards. FASB would consider multiple factors in setting each new standard to determine whether some, all or no NFPs would be eligible for alternatives within GAAP for private companies. NFPs and employee benefit plans that fall within the scope of ASC Topics 960 through 965 would be specifically excluded from the definition of public business entity.

However, this could create issues for a non-profit that has conduit debt. If the proposal is accepted as-is, those organizations with conduit debt would then have to follow public company guidance for previously issued standards and private company guidance for any standards created after the new definition takes effect.

If you anticipate this change to create challenges for your organization, take note that the comment deadline for this proposal is September 20, 2013.

You can view the entire document of proposed changes, which also discusses alignment with IFRS, here.

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