Simpler accounting option now available for leasing entities
Abstract: FASB’s Accounting Standards Update (ASU) No. 2014-07, Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements, offers private companies a simpler way to account for certain related leasing entities. Construction businesses that adopt the alternative can avoid the potentially costly variable interest entity (VIE) analysis associated with these entities and need not consolidate these entities on their financial statements. This article explains why this can be advantageous for contractors. A private company may opt out of the VIE rules with respect to a leasing entity, but, as a sidebar explains, this isn’t right for every contractor.