The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-03 on March 7, 2016.

ASU 2016-03:

  1.  Eliminates the effective dates for the four pronouncements issued in 2014 and 2015 by the Private Company Council (PCC) related to Goodwill, VIEs involving leases between parties under common control, simple interest-rate swaps, and the recognition of intangibles in a business combination.  As a result, those pronouncements become effective immediately.
  1. Allows entities to adopt these alternative accounting approaches at a later date without having to justify that the new standard is preferable.
  1. Establishes transition guidance for an entity electing to apply one of the approaches.


Why is the FASB issuing this Accounting Standards Update?

According to the FASB Website:

The Private Company Council (PCC) added this issue to its agenda in response to concerns raised by private company stakeholders about the required assessment of preferability when electing a private company accounting alternative for the first time after its effective date. Those stakeholders were concerned about scenarios in which it may be suboptimal for a private company to elect a private company accounting alternative by its effective date because of the facts and circumstances of that company or because that company is unaware of that private company accounting alternative until after its effective date.


The PCC also added this issue to its agenda to address concerns raised by private company stakeholders about transition guidance in Accounting Standards Updates No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, and No. 2014-03, Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach. Those stakeholders were concerned that a private company that voluntarily elects the accounting alternatives provided in Update 2014-02 or Update 2014-03 after their effective dates would not benefit from the favorable transition provisions provided in those Updates.

When is Statement ASU 2016-03 eligible to be tested on the CPA Exam?

ASU 2016-03 is eligible to be tested on the CPA Exam in Q4 2016. Be sure to check back often to receive the most up-to-date information on CPA Exam changes.