Sterling Heights, MI (PRWEB) June 13, 2014
Private business owners who own the building or property their company uses routinely set up separate legal entities to own these buildings and properties that are then leased to the operating company. The reasons for setting up separate legal entities can vary, but a majority of benefits seen from this action are for tax purposes, estate planning and liability protection issues. In some cases, these separate lessor entities are required to be consolidated with the operating company as variable interest entities (VIE) under accounting standards. The cost to consolidate these lessor entities into the financial statements of the operating company can be significant, and many users of the financial statements have stated that the costs outweigh the benefits of consolidation.
In 2012 the Financial Accounting Standards Board (FASB) established the Private Company Council (PCC) to help address issues, such as those noted above, to better serve the needs of private company financial statement users, preparers and practitioners. On March 20, 2014 the PCC issued new guidance relating to the consolidation of lessor entities in common control leasing agreements. This new guidance is a continuation of efforts by the FASB and PPC to address the cost and complexity of accounting matters related to private companies and at the same time provide useful information to the users of private company financial statements.
The new guidance allows the lessee entity to elect an accounting alternative to not apply VIE guidance to a lessor entity. This alternative can be applied if certain characteristics exist in the relationship between the lessee and lessor entities--there is common control, an executed lease agreement is in place, substantially all activity is related to leasing activity, and the lessee explicitly guarantees or provides collateral for any lessor obligation related to the leased asset. Under the new guidance the lessee would not be required to provide the standard VIE disclosures, rather the lessee would instead make certain disclosures related to the exposures of the lessee related to providing financial support to the lessor.
This new amendment will be effective for annual periods beginning after December 15, 2014; however, early adoption is permitted. For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040, or visit us on the web at http://www.uhy-us.com.
About UHY LLP
UHY LLP, a licensed CPA firm, provides audit and other attest services to public and private companies. UHY Advisors provides tax and consulting services to a variety of sectors. UHY Advisors FLVS provides forensic, valuation, intellectual property, electronic discovery and international arbitration services to law firms and their clients. Many of these services grew from client business needs and their requests for assistance in a variety of areas of expertise.
UHY LLP, operating in an alternative practice structure with UHY Advisors, forms one of the largest professional services firms in the US. While that scale might provide confidence for some clients, others tell us our greatest value is the way we bring these resources to bear to help address today's evolving business challenges. It's a philosophy we call "The Next Level of Service". To learn more visit http://www.uhy-us.com.
All of the above entities are members of UHY International, a global network of independent professional services firms that provide audit, tax and consulting services around the world. UHY International member firms comprise one of the top international accounting networks in the world. As a member firm, we provide our clients with resources in business centers strategically located around the globe. We are an active member in this organization with significant participation that brings the power of an international network to bear for our clients.
UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of "UHY Advisors." UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP and UHY Advisors, Inc. are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. "UHY" is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.
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