PRIVATE COMPANY COUNCIL/SMALL BUSINESS ADVISORY COMMITTEE JOINT MEETINGDecember 16, 2021
The Private Company Council (PCC) and the Small Business Advisory Committee (SBAC) jointly met on Tursday, December 16, 2021. Below is a brief summary of the topics addressed by the PCC and the SBAC at the joint meeting:
- FASB Agenda Consultation: The PCC and the SBAC discussed stakeholder feedback received on the June 2021 FASB Invitation to Comment, Agenda Consultation. PCC and SBAC members encouraged the Board to balance the perspectives of both investors and preparers when contemplating guidance on the disaggregation of financial performance information. Members also advised the Board to narrowly define the scope of projects related to environmental, social, and governance (ESG) issues that are within the FASB’s purview. Board members agreed and the FASB chair noted that the current ESG-related research project has a narrow scope. Members also provided the Board with feedback on other discussion topics, including financial key performance indicators, presentation of the statement of cash flows, accounting for certain emerging transactions such as digital assets and software costs, and the reduction of unnecessary complexity in certain areas such as accounting for consolidation, debt modifications, and distinguishing liabilities from equity.
- Leases (Topic 842): The PCC and the SBAC discussed implementation experiences of Topic 842, including systems and accounting resources, utilization of FASB educational materials, population of leases, and strategies for educating financial statement users. PCC and SBAC members who have experience implementing Topic 842 discussed best practices such as proactively starting the implementation process to facilitate the transition and the importance of establishing communication between operational teams within an organization. Members also discussed considerations for a range of lease portfolio sizes when implementing Topic 842 and accounting challenges such as embedded leases, determining the incremental borrowing rate, and system challenges including considerable time needed to integrate the software and a lack of accessibility to software vendors.
- Identifiable Intangible Assets and Subsequent Accounting for Goodwill: PCC and SBAC members discussed the Board’s leanings and tentative decisions to date and potential changes to the goodwill impairment model. Specific discussion topics included the level at which the impairment test is performed, timing of the goodwill impairment test, and user feedback on the impairment and amortization model. Members clarified the tentative Board decision on the goodwill amortization period and its interaction with the current private company accounting alternative to amortize goodwill using a 10-year amortization period. Some user members commented that although the subsequent accounting for goodwill is a lower priority than some other areas (for example, disaggregation of financial performance information), the potential changes would provide consistency and comparability among entities.
Meeting Recaps are provided for those interested in following the activities of the PCC and other FASB advisory groups. Official positions of the FASB are reached only after extensive due process & deliberations. More details on the PCC’s and other advisory groups’ input on the FASB’s projects can be found within the meeting minutes, which will be published on the FASB website in the coming weeks.