June 21 and 22, 2021

The Private Company Council (PCC) met on Monday, June 21 and Tuesday, June 22, 2021. Below is a brief summary of topics addressed by the PCC at the meeting:
  • PCC Issue No. 2018-01, “Practical Expedient to Measure Grant-Date Fair Value of Equity-Classified Share-Based Awards”: The PCC reached a final consensus on a practical expedient for a private company to determine the current price input of equity-classified share-based awards issued to both employees and nonemployees that describes the characteristics of a reasonable application of a reasonable valuation method. The PCC discussed significant external review feedback and addressed sweep issues related to scope, application, disclosure, effective date, and measurement. The PCC also discussed the costs and benefits of stating within the Accounting Standards Codification that valuation approaches from the Treasury Regulations of Section 409A of the U.S. Internal Revenue Code are examples of ways to achieve the practical expedient. The FASB will meet at a future meeting to consider endorsement of the final consensus.
  • Profits Interests and Their Interrelationship with Partnership Accounting: FASB staff provided the PCC with an update on the research and outreach conducted by the staff and Working Group on this PCC research project. PCC members shared their experiences with profits interests in practice, noting that generally profits interests awards are granted to senior management and that the terms of the awards are diverse and can be complex. PCC members noted that there are challenges associated with measuring profits interests and some noted that determining whether to apply the guidance in Topic 718, Compensation—Stock Compensation, or Topic 710, Compensation—General, can be challenging. Other PCC members emphasized the importance of broadly considering the types of partnerships and similar entities that issue profits interests when identifying the scope of a potential project. FASB staff provided the PCC with an example of profits interests awards granted by a private company that remained outstanding after an initial public offering.
  • Current Issues in Financial Reporting: PCC members discussed practice issues arising from the current business environment under the COVID-19 pandemic. PCC members discussed the accounting and reporting for employee retention credits included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent COVID-19-related legislation.
  • Disclosures by Business Entities about Government Assistance: FASB staff reported that, at its May 26, 2021 meeting, the Board completed redeliberations on the proposed Accounting Standards Update, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, including narrowing the scope to transactions a business entity is accounting for, by analogy, under a grant or contribution model. The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot. PCC members asked the staff several clarifying questions about the transition method and the disclosure requirements.
  • Improving the Accounting for Asset Acquisitions and Business Combinations (Phase 3 of the Definition of a Business project): FASB staff provided the PCC with a project update and noted this project’s objective and background. FASB staff then gave a summary of the accounting for contingent consideration in business combinations and solicited feedback from PCC members. PCC members had mixed views on how to account for contingent consideration in a business combination and what the expected costs and expected benefits would be under different models. Some PCC members were in favor of contingent consideration only being recognized when it is probable and estimable.  However, if the contingent consideration arrangement does not meet that recognition criteria, key information should be disclosed. Others noted they thought there were benefits to recognizing the fair value of the contingent consideration at the acquisition date.
  • Revenue—Post-Implementation Review:  PCC members briefly discussed implementation issues related to Topic 606, Revenue from Contracts with Customers, and FASB staff provided an update on the next steps of the post-implementation review.
  • Leases (Topic 842)—Discount Rate for Lessees That Are Not Public Business Entities: FASB staff updated the PCC on the proposed Accounting Standards Update, Leases (Topic 842), Discount Rate for Lessees That Are Not Public Business Entities, which was issued on June 16, 2021, and has a comment period ending on July 16, 2021. The proposed amendments are intended to improve discount rate guidance for lessees that are not public business entities, including private companies. FASB staff solicited feedback on an alternative that would require disclosure of the weighted-average discount rate separately for leases that use the risk-free rate and all other leases. PCC members noted that the alternative disclosure may result in additional cost for preparers and expressed mixed views about the decision-usefulness of the information resulting from the alternative disclosure, versus a more qualitative disclosure.
  • Identifiable Intangible Assets and Subsequent Accounting for Goodwill: FASB staff provided a project update and solicited feedback from PCC members on certain factors that may be used to estimate the useful life of goodwill. Several PCC members did not agree with the use of an estimated payback period as a method to estimate the useful life of goodwill and cautioned against it being the only alternative method to a default amortization period. PCC members indicated that the transition was smooth for those private companies that have elected the accounting alternative to amortize goodwill and that most private companies have elected to test goodwill for impairment at the entity level, rather than at the reporting unit level.
  • Disclosure Framework: Disclosures—Interim Reporting: FASB staff solicited feedback from PCC members to better understand common reporting practices of nonpublic entities, including the types of financial information produced by private companies and requested by private company financial statement users at interim periods. PCC members provided feedback that private company interim financial information tends to exclude notes to the financial statements and that the content of the financial information is generally driven by covenant compliance and other debt considerations.
The next PCC meeting is scheduled for Monday, September 27, 2021, and Tuesday, September 28, 2021.



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.