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Thinking about Going Public? Differences in Accounting Standards for Private and Public Companies

Executive Resource
Private companies considering going public need to consider key differences between private company accounting standards and public business entity accounting standards. .
December 24, 2021

If your company is considering going public, it’s important to consult with an accounting professionals who can offer guidance on how these different standards may affect your situation. This article addresses (1) the required effective (adoption) dates of certain accounting standards, (2) certain accounting alternatives and elections that are only available to private companies, as well as (3) additional disclosures which are required only for public business entities and SEC registrants.

Effective Dates

For certain new standards and amendments to current standards, the required effective date for private companies is later than the required effective date for public business entities in order to allow private companies additional time to prepare and comply with the new standard.  Recent high profile standards with delayed effective dates for private companies include ASC 842, Leases, and ASC 326, Financial Instruments – Credit Losses.  In addition to the delayed effectiveness dates provided by the FASB in the original Accounting Standards Updates (ASU’s), due to the effects of COVID-19 and other challenges in companies complying with these standards, the effective date for these standards have been pushed back further for private companies.

Additional considerations:

Private Company Alternatives

In addition to having different adoption dates, the efforts of the Private Company Council (PCC) advisory board of the FASB have provided certain accounting alternatives, which are only available to private companies. The goal of these alternatives is to reduce the burden and cost on private companies.  Common examples include:

Accounting for goodwill and business combinations

Share Based Compensation

Additional considerations:

Additional Requirements for Public Companies

There are a number of other rules and disclosure requirements that apply only to public business entities.  While the SEC and applicable accounting standards often require additional information and detail to be disclosed for many topics (for example, the disclosure requirements under ASC Topic 606: Revenue from Contracts with Customers are often much more extensive for public companies), certain topics are only required for public companies.

For companies going public, some of the more challenging topics to adhere to include:

If you have questions about your company’s situation, we can help. Contact us for information about how these and other accounting standards may apply to your situation.

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