PRIVATE COMPANY COUNCIL/SMALL BUSINESS ADVISORY COMMITTEE JOINT MEETING

MEETING RECAP


December 17, 2019

The Private Company Council (PCC) and the Small Business Advisory Committee (SBAC) jointly met on Tuesday, December 17, 2019. Below is a brief summary of the issues addressed by the PCC and the SBAC at the joint meeting:
  • Reference Rate Reform: Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting: The FASB staff updated the PCC and the SBAC on the Board’s recent decisions. The PCC and the SBAC discussed the extent of general awareness of the issue and noted a varying degree of preparation among small public and private companies for the transition.
  • Equity Method Accounting for Investments: The PCC and the SBAC discussed potential areas of simplification for the equity method of accounting for investments. Several members of both advisory groups noted that while measuring equity method investments at fair value through earnings could provide decision-useful information, there may be incremental costs associated with that change. Some members expressed concern that application of the measurement alternative in the absence of a readily determinable fair value could result in the loss of decision-useful information. Although some members of the advisory groups supported a potential simplification, the overall sentiment of the group was to maintain the existing equity method of accounting.
  • Leases (Topic 842): The PCC and the SBAC discussed their current implementation progress and experience with the Leases standard. In addition, the members discussed the costs and benefits of applying the standard, with a focus on the initial costs incurred to implement the standard and expectations for ongoing costs. In addition, SBAC members emphasized the importance of having an overall implementation plan and shared their views and potential alternatives on implementation issues related to determining the incremental borrowing rate. SBAC members also shared their observations about identifying embedded leases and acknowledged that the same application questions existed under the prior lease accounting requirements.
  • Revenue from Contracts with Customers  (Topic 606): The PCC and the SBAC discussed their current implementation progress and experience with the Revenue Recognition standard. Several members from both advisory groups agreed that companies generally underestimated the time and effort required to appropriately implement the standard, which contributed to a lag in implementation. Users from both advisory groups commented on the benefits of the enhanced disclosures provided by this standard.
  • Identifiable Intangible Assets and Subsequent Accounting for Goodwill: The PCC and the SBAC 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. Members of the advisory groups focused on issues related to comparability and operability, including how a potential goodwill amortization period should be determined and whether the private company goodwill alternative should be amended if the guidance for public business entities changes.  Many members of both advisory groups prefer a simplified amortization approach for goodwill accounting, noting that the information about goodwill and its impairment is only useful to certain financial statement users and relevant for a limited period of time.   
  • Accounting by a Joint Venture for Nonmonetary Assets Contributed by Investors: Several members from both advisory groups provided feedback on potential alternatives related to the accounting for nonmonetary assets contributed to a joint venture in a standalone joint venture’s financial statement. Generally, members supported accounting for contributed nonmonetary assets at fair value, given the economics of the formation of a joint venture, the venturer’s accounting requirements, and the costs and benefits of providing that information.