September 28, 2021
The Private Company Council (PCC) met on Tuesday, September 28, 2021. Below is a brief summary of topics addressed by the PCC at the meeting:
- Summary of September 27, 2021 Meeting with the AICPA Private Companies Practice Section, Technical Issues Committee (TIC): PCC members reported on the issues discussed with TIC during their annual PCC-TIC Liaison meeting. PCC members shared observations on various topics including disaggregation of financial information, debt modifications, balance sheet classification, digital assets, environmental, social, and governance matters, leases, contingent consideration, disclosures, statement of cash flows, and consolidation accounting. PCC members highlighted that TIC members found the FASB Staff Educational Paper, “Topic 470 (Debt): Borrower's Accounting for Debt Modifications,” to be useful; however, PCC members also noted that there appears to be an unfortunate lack of awareness of the paper by many private companies and their auditors. Additionally, PCC members expressed interest in TIC’s more general preference for principles-based accounting standards when addressing private company needs and thanked TIC for the insightful dialogue.
- Leases–Implementation Issues: FASB staff updated the PCC on the post-implementation review activities related to Topic 842, Leases. PCC members discussed the challenges of implementation, including implementing new software, complying with the detailed disclosure requirements, and auditor resource shortages. PCC members also discussed and expressed mixed views on an additional deferral of the guidance.
- Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions: FASB staff updated the PCC and solicited feedback on the proposed Accounting Standards Update, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which was issued on September 15, 2021 and has a comment period ending on November 14, 2021. PCC members who offered feedback generally agreed that the proposed amendments would result in cost savings but expressed mixed views on the decision-usefulness of the information that may result from the proposed amendments.
- Profits Interests and Their Interrelationship with Partnership Accounting: FASB staff updated the PCC on the outreach conducted by the staff and Working Group during June and July 2021 and noted that outreach conducted with stakeholders after July 2021 would be summarized at a future PCC meeting. FASB staff summarized four profits interests accounting issues for which feedback has been received, including (1) determining the scope of guidance, (2) determining whether implied performance conditions are present, (3) classification as liabilities or equity, and (4) measurement. The PCC Chair and FASB staff thanked the outreach participants for their preparation and valuable feedback. PCC members noted that these accounting issues are complex and might not have simple solutions.
- PCC Issue No. 2018-01, “Practical Expedient to Measure Grant-Date Fair Value of Equity-Classified Share-Based Awards”: FASB staff updated the PCC on the status of the PCC’s project for an optional private company practical expedient for determining the current price input of equity classified share-based awards. FASB staff noted that the Board endorsed the PCC’s consensus at the August 4, 2021 Board meeting and that the final Accounting Standards Update is expected to be released in October 2021.
- FASB Agenda Consultation: FASB staff updated the PCC on the FASB research project and how PCC member feedback from the April PCC meeting was represented in the Invitation to Comment, which had a comment due date of September 22, 2021. FASB staff plans to provide a feedback summary to the Board by the end of 2021 and will return to the PCC to discuss private-company specific feedback at a future meeting. PCC members discussed the interaction between the disaggregation of financial information for private companies and the Private Company Decision Making Framework.
- Credit Losses: FASB staff updated the PCC on the post-implementation review activities related to Topic 326, Financial Instruments—Credit Losses, including outreach, a public roundtable, educational workshops, and monitoring activities. The staff also provided an update on three technical agenda projects: Financial Instruments—Credit Losses (Topic 326)—Acquired Financial Assets; Financial Instruments—Credit Losses (Topic 326)—Targeted Improvements to the Accounting for Troubled Debt Restructuring for Creditors; and Codification Improvements—Financial Instruments—Credit Losses (Vintage Disclosure: Gross Writeoffs and Gross Recoveries). A PCC member expressed that Topic 326 is working as intended and has proven to be effective overall.
- Current Issues in Financial Reporting: The PCC Chair noted that while no new practice issues were identified resulting from the current business environment under the COVID-19 pandemic, some stakeholders continue to have challenges in accounting for government assistance and determining the appropriate disclosures to provide.
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.