December 16, 2019
The Private Company Council (PCC) met on Monday, December 16, 2019. Below is a brief summary of issues addressed by the PCC at the meeting, categorized by project:
- PCC Issue No. 2018-01, “Practical Expedient to Measure Grant-Date Fair Value of Equity-Classified Share-Based Awards” : The PCC and the Board continued their discussion from the September 2019 PCC meeting about a potential practical expedient in which the current price for equity-classified share-option awards could be determined using a valuation that meets the requirements of Section 409A of the U.S. Internal Revenue Code. The PCC and the Board discussed whether and how the practical expedient (1) would differ from current practice and (2) could reduce the cost and complexity associated with determining the current price input. The PCC unanimously voted to move forward with the project and asked the staff to draft an Exposure Draft to be submitted for endorsement by the Board.
- Identifiable Intangible Assets and Subsequent Accounting for Goodwill: The PCC and the Board discussed feedback received from the Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill, as well as from the November 2019 public roundtable meetings. The PCC provided insight on questions of comparability and operability, and several PCC members indicated that if there is a change in the subsequent accounting for goodwill for public business entities, the private company goodwill alternative should not be amended.
- Distinguishing Liabilities from Equity (Including Convertible Debt): The PCC and the Board discussed feedback received on the proposed Update, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The PCC expressed overall support for the Board’s decisions. Several PCC members recommended the Board consider an effective date for private companies that is two years after the effective date for public business entities in its upcoming redeliberations.
- EITF Issue No. 19-C, “Warrant Modifications: Issuers’ Accounting for Modifications of Equity Classified Freestanding Call Options That Are Not within the Scope of Topic 718, Compensation—Stock Compensation, or Topic 815, Derivatives and Hedging”: The FASB staff provided an overview of the project and solicited feedback from PCC members on an issuer’s accounting for equity-classified warrant modifications. Certain PCC members discussed their experience in warrant modification transactions, acknowledged the diversity in practice, and provided their views on common analogies made due to the lack of authoritative guidance.
- Simplifying the Balance Sheet Classification of Debt: The PCC and the Board discussed feedback received on the revised proposed Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent). Certain PCC members noted areas of concern on unused long-term financing arrangements and the potential increase in the cost of debt issuance but, overall, PCC members continued to express general support for the project.
PCC Meeting Recaps are provided for those interested in following the activities of the PCC. Official positions of the PCC and the FASB are reached only after extensive due process & deliberations. More details on the PCC’s input on the FASB’s projects can be found within the meeting minutes, which will be published on the PCC website in the coming weeks.