Project Update

Development Stage Entities

Last updated on June 23, 2014. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Project Objective
*Due Process Documents
*Decisions Reached at Last Meeting
*Summary of Decisions Reached to Date
*Next Steps
Board/Other Public Meeting Dates
Background Information
Contact Information

Project Objective

The project is intended to reduce cost and complexity in the financial reporting system by eliminating inception-to-date information from the financial statements of development stage entities. As part of the project, the staff will research potential additional disclosures that could result in increased relevance for users of development stage entity financial statements.

*Due Process Documents

On June 10, 2014, the Board completed this project with the issuance of ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.

Download the Accounting Standards Update No. 2014-10.

On November 7, 2013, the Board issued Proposed Accounting Standards Update—Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The comment deadline was December 23, 2013.

Download Proposed Accounting Standards Update.

*Decisions Reached at Last Meeting (February 26, 2014)

See meeting minutes below.

*Summary of Decisions Reached to Date

See the Accounting Standards Update No. 2014-10.

*Next Steps

None.

Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Boards' deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

February 26, 2014 Board Meeting—The Board affirmed the changes in the November 2013 Exposure Draft, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, and directed the staff to draft a final Accounting Standards Update for vote by written ballot.
September 11, 2013 Board Meeting—The Board directed the staff to draft a proposed Accounting Standards Update that would supersede all of the incremental presentation and disclosure requirements for development stage entities that are currently required by Topic 915, Development Stage Entities.
July 16, 2013 PCC Meeting—Agenda Announcement

Background Information

The Board issued FASB Statement No. 7, Accounting and Reporting by Development Stage Enterprises, in June 1975. Statement 7 was later codified in Topic 915, Development Stage Entities. A development stage entity is an entity that devotes substantially all of its efforts to establishing a new business and for which (a) planned principal operations have not commenced or (b) planned principal operations have commenced, but there has been no significant revenue therefrom.

Prior to the issuance of Statement 7, development stage entities prepared financial statements using various recognition and measurement methods, most notably in regard to research and development costs and different presentation formats. After deliberating the issues, the Board concluded that development stage entities should present the same basic financial statements and apply the same recognition and measurement requirements for revenues, start-up costs, and other similar costs incurred as required of established operating entities. The FASB added additional presentation requirements for development stage entities to require those entities to present cumulative information about income statement line items, cash flows, and equity transactions.

Stakeholders have since objected to the additional presentation requirements because they believe that the costs of providing such information are excessive and the information is not relevant to users of financial statements. The stakeholders have told the staff that that there are now many development stage entities with multiple products under development in a single entity which do not intend to ever manufacture a single product, Instead,, such an entity may periodically sell the research and development to another business. Pharmaceutical, biotechnology, and technology industries are most likely to have long-term development stage entities affected by Topic 915 and it is now common for many of those entities to remain in the development stage for several years or even in perpetuity.

At their February 12, 2013, meeting, the Private Company Council directed the FASB staff to conduct preagenda research and outreach to stakeholders on Topic 915. The staff conducted outreach with both private and public companies and received similar feedback from both. On the basis of the recommendation of the Private Company Council at its July 16, 2013, meeting, the FASB added a project to its technical agenda to address financial reporting complexity for all entities in the development stage.

Contact Information

Regenia Cafini
Project Manager
rdcafini@fasb.org

Laura Winkler
Project Research Associate
lwinkler@fasb.org