The Financial Accounting Standards Board has excluded credit unions from the definition of “public business entities,” exempting them from certain reporting provisions under GAAP and giving credit unions more latitude to determine what their reporting requirements should be.
The definition will be used by FASB and its sister organization, the Private Company Council, to specify the scope of future accounting guidance, according to the Credit Union National Association.
CUNA and other stakeholders had asked FASB to modify its definition of "public business entity" to clear up current inconsistencies and complexities caused by having multiple definitions (see Credit Unions See Opportunity in FASB Proposal). The new definition will make it clearer which nonpublic entities potentially qualify for alternative financial accounting and reporting guidance.
CUNA has maintained that credit unions are outside the definition of a "public business entity" and therefore should be eligible for alternatives under U.S. GAAP that are established by FASB and the PCC.
However, CUNA assistant general counsel Luke Martone cautioned, credit unions should proceed with some caution. "FASB has stated that, 'decisions about whether an entity may apply permitted differences within U.S. GAAP ultimately may be determined by regulators...and other creditors, or other financial statement users that may not accept financial statements that reflect accounting or reporting alternatives for private companies,'" Martone said in a statement. "So, the extent of any latitude afforded to credit unions will also involve the National Credit Union Administration and that could be problematic--although we will push them for as much flexibility as possible. We will be discussing this issue again with senior NCUA staff during meetings at the CUNA Governmental Affairs Conference this month and encouraging them to allow eligible private company alternatives.”