Alert: FASB Accounting Standards Update No. 2014-10 - Development Stage Entities

Category: US GAAP

Alert: FASB Accounting Standards Update No. 2014-10 - Development Stage Entities

On June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-10 Development Stage Entities (Topic 915). The ASU eliminates the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification resulting in no differentiation under US Generally Accepted Accounting Principles (GAAP) between such entities and all other reporting entities. Consequently, Topic 915 has been removed, in its entirety, from the FASB Accounting Standards Codification thereby removing all incremental financial reporting requirements from US GAAP for development stage entities. Specifically, a development stage entity is no longer required to:

  • Present inception-to-date information in the statements of income, cash flows and shareholder equity.
  • Label its financial statements as those of a development stage entity.
  • Disclose a description of the development stage activities in which it is engaged.
  • Disclose, in the first year following which the entity is no longer a development stage entity, that in prior years it had been in the development stage.

Further amendments under ASU No. 2014-10 include:

  • Elimination of an exception provided to development stage entities under Topic 810 Consolidation (paragraph 810-10-15-16) resulting in a variable interest entity evaluation being conducted on the basis of the amount of investment equity at risk. This requires both qualitative and quantitative evaluations.
  • Clarification of the applicability of the guidance in Topic 275 Risks and Uncertainties to entities that have not commenced planned principal operations.

All amendments, with the exception of the clarification to Topic 275 which should be applied prospectively, should be applied retrospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. For other entities, the amendments are effective for annual reporting periods beginning after December 15, 2014, and interim reporting periods beginning after December 15, 2015.

With respect to the Topic 810 amendments, both public and non-public entities have more time to adopt them. For public business entities, they should be applied retrospectively for annual reporting periods beginning after December 15, 2015, and interim periods therein. For all other entities, they should be applied retrospectively for annual reporting periods beginning after December 15, 2016, and interim reporting periods beginning after December 15, 2017.

Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities).

To access the full script of ASU No. 2014-10, click here.

This communication contains a general overview of the topic and is current as of June 10, 2014. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made with in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2014. All rights reserved.

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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.