Five Criteria that Define a Public Business Entity

5 Criteria that Define a Public Business Entity (ASU 2013-12)Here at Mayer Hoffman McCann, we continue to monitor progress on private company standard-setting. Last month, the Financial Accounting Standards Board issued Accounting Standards Update 2013-12 (ASU 2013-12) which outlines criteria for defining a public business entity.

Any entity that meets any one of the five criteria listed below is considered a public business and cannot elect accounting alternatives available to private companies which are established after December 2013.

More details about this standard and recent activity of the Private Company Council can be found in our MHM Messenger 2014-02: Private Company Decision Making Framework and Definition of a Public Business Entity.

  • Criteria 1: “It [the entity] is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing).”
  • Criteria 2: “It [the entity] is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulation promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC.”
  • Criteria 3: “It [the entity] is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer.”
  • Criteria 4: “It [the entity] has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market.”
  • Criteria 5: “It [the entity] has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract , or regulation to prepare U.S. GAAP financial statements (including footnotes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion.”
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