PRIVATE COMPANY COUNCIL (PCC)

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September 22-23, 2022

The Private Company Council (PCC) met on Thursday, September 22 and Friday, September 23, 2022. Below is a summary of topics addressed by the PCC at the meeting:
  • Targeted Improvements to Income Tax Disclosures: PCC members discussed the two areas of income tax disclosures that the Board is considering for potential improvements (specifically, income taxes paid and rate reconciliation). PCC members who are users noted that disaggregated income tax information would help them better understand a company’s tax risks and opportunities, assess trends, or highlight areas where to ask management for more information. Some PCC members who are preparers noted that although information about income taxes paid by jurisdiction is readily available, they question the relevance of disclosing such information. Those PCC members also expressed concern that while a quantitative rate reconciliation could be provided, it would create undue costs compared to the narrative disclosures currently required for private companies. PCC members agreed that it is important to assess the costs and benefits of those potential improvements for private companies.
  • Leases (Topic 842): Common Control Arrangements: FASB staff highlighted the Board’s recent decision to add a project to its technical agenda (tentative decisions here) to address the following issues related to arrangements between entities under common control: (1) what terms and conditions an entity should consider for determining whether a lease exists and, if a lease does exist, the classification and accounting for that lease, and (2) accounting for leasehold improvements associated with leases between entities under common control. Most PCC members were supportive of the practical expedient that would allow private companies and not-for-profit entities that are not conduit bond obligors, on an arrangement-by-arrangement basis, to use written terms and conditions to (1) determine whether an arrangement is a lease, and, if so, (2) classify and account for that lease. Under the practical expedient, an entity would not have to determine whether the written terms and conditions are legally enforceable. However, if no written terms and conditions exist, an entity would continue to use enforceable rights and obligations to apply Topic 842, which is consistent with the requirements for all other arrangements. One PCC member expressed concern that written terms alone may not reflect the economic substance of the lease. PCC members also discussed specific challenges when accounting for leasehold improvements in arrangements between entities under common control, including the determination of an appropriate lease term, and the need for sufficient disclosures to provide decision-useful information to financial statement users.
  • Accounting for and Disclosure of Software Costs: FASB staff summarized the Board’s recent decision to add a project on software costs to its technical agenda and potential alternatives being explored by the staff. Some PCC members expressed concerns that significant judgment may be required to identify capitalizable software costs, such as labor costs. PCC members also noted that additional disclosures about software costs may be decision useful. PCC members expressed mixed views on whether a principles-based model for capitalization or an alternative to expense all software costs would be operable or more relevant. Some PCC members asserted that software costs are not a prevalent issue for private companies and that it may be difficult for preparers to determine a useful life for certain software assets.
  • Profits Interests: PCC members provided input about (1) potential illustrative examples to clarify how an entity would apply the existing scoping guidance in Topic 718, Compensation—Stock Compensation, to various profits interest awards and (2) potential transition guidance for those examples. Overall, PCC members were supportive of the illustrative examples and the staff’s approach to align those examples with the current scoping guidance in Topic 718. Some PCC members suggested that the FASB staff consider whether additional fact patterns should be incorporated into the examples. Overall, PCC members were supportive of a prospective transition method with qualitative disclosures. A few PCC members indicated that retrospective application should be a permitted transition method.
  • Accounting for and Disclosure of Crypto Assets: FASB staff summarized the Board’s decisions to add a project on crypto assets to its technical agenda and to establish the scope of the project. FASB staff provided an overview of current practices for accounting for crypto assets under Topic 350, Intangibles—Goodwill and Other. Some PCC members questioned whether the scope of the project, which excludes nonfungible assets, will sufficiently address the need for standard setting in this area. FASB staff and Board members noted that the project’s scope would represent a significant portion of crypto asset market capitalization. PCC members were generally supportive of including public and nonpublic entities within the project’s scope.
  • Conceptual Framework: The Reporting Entity; Recognition and Derecognition: FASB staff provided an overview of the Conceptual Framework and its role in standard setting. FASB staff summarized recent decisions on two of the Board’s current Conceptual Framework projects: (1) the reporting entity and (2) recognition and derecognition.
  • Stock Compensation Disclosures: FASB staff and members of the stock compensation disclosures working group provided the PCC with an update on the working group’s progress. The working group has met twice since the June 2022 PCC meeting to analyze the user relevance of the current disclosure requirements and the cost and complexity to prepare and audit those disclosures. The working group will conduct outreach with various types of private company financial statement users to solicit feedback on an illustrative example.
  • Other Business: A PCC liaison meeting will be held with members of the Risk Management Association (RMA) on October 13, 2022. RMA members who are expected to participate in the liaison meeting represent lenders and creditors to private companies.
The next PCC meeting is scheduled for Thursday, December 15, and Friday, December 16, 2022.


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.
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