Many community banks are likely to save on yearly consulting and audit costs as a result of revisions made to the Financial Accounting Standards Board’s understanding of what defines a public business entity.
Since the definition was issued in 2013 by FASB, statements by FASB members and staff indicated that the vast majority of closely held banks would be considered PBEs and thus required to implement new standards early and have more stringent disclosure requirements. For example, starting in 2018, fair value disclosure requirements will be expanded to reflect “exit pricing,” which likely will require engagement of consulting experts by both the bank and its auditor.
Non-PBEs are exempt from the disclosure, thus saving an estimated $10,000 to $25,000 per year. Non-PBEs will also get additional time to implement the CECL accounting standard within their call reports.
The new interpretation of PBE, forged in discussions among American Bankers Association experts, FASB staff and auditors in the American Institute of CPAs, is included in ABA’s newly issued discussion paper, which addresses various concerns bankers must address in determining whether they qualify as a PBE and includes a flow chart that will enable a bank to walk through the evaluation process with its auditor. For more information, contact ABA’s Mike Gullette.
