In March, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-07 Consolidations (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements. This standard is the third accounting alternative proposed by the Private Company Council (PCC) and endorsed by the FASB. It is an accounting alternative that permits a private company reporting entity to elect to not apply the variable interest entity (VIE) guidance to certain leasing arrangements. If elected, the guidance of this standard must be applied to all qualifying lease arrangements.
The adoption of ASU 2014-07 may result in the deconsolidation of commonly controlled lessor entities that were previously consolidated under the VIE guidance, the removal of disclosures prescribed by the VIE guidance for consolidated and certain non-consolidated commonly controlled lessor entities, or the reduction in the documentation and procedures necessary to evaluate these types of entities under the VIE guidance.
Through early adoption, qualifying entities may elect to not apply the VIE guidance to certain common control leasing arrangements under this standard for their December 31, 2013 financial statements (for calendar-year companies) as long as those financial statements have not been made available for issuance prior to March 20, 2014.
Learn more about ASU 2014-07 in this Substance of the Standard from MHM.