October 9, 2018
On Tuesday, October 9, 2018, the Private Company Council (PCC) discussed and provided input on the following topics:
- Consolidation Targeted Improvements to Related Party Guidance for Variable Interest Entities: PCC members were briefed on an additional criterion added by the Board to address concerns raised by some stakeholders that would preclude the private company accounting alternative from being applied to any legal entity in which a private company holds a majority of the legal entity’s voting interest. The PCC did not object to the additional criterion, noting that it should not preclude private companies from applying the accounting alternative to sibling entities under common control.
- Leases Implementation: The PCC discussed ongoing lease accounting implementation activities of the FASB.
- Distinguishing Liabilities from Equity: PCC members broadly supported the FASB’s efforts to simplify the accounting for the issuance of financial instruments with embedded conversion features. Several PCC members stated that current disclosure requirements for these financial instruments are adequate and did not recommend any additional disclosures for convertible instruments.
- Disclosure Framework: Disclosure Review—Income Taxes: The PCC discussed the Disclosure Review project relating to Income Taxes, focusing on three main areas:
- Additional disclosures that may be needed as a result of the Tax Cuts and Jobs Act
- Disclosures that may no longer be relevant as a result of the Tax Cuts and Jobs Act
- Proposed disclosures that comment letter respondents indicated may not provide relevant information.
- Share-Based Compensation: PCC members discussed recent outreach performed with tax, valuation, and legal experts regarding the tax requirements for valuing share-based payments and the other economic factors influencing the strike price in relation to the fair value of the underlying share. The PCC expressed support for a practical expedient to assume the strike price is the fair value of the underlying share when valuing an equity-classified award, subject to certain “guardrails” to prevent entities from abusing the practical expedient. The PCC and Board agreed that the language used in the expedient should be carefully considered to ensure that the intended cost relief is realized when applied in practice.
- The next PCC meeting will be held on Tuesday, December 11, 2018, in Norwalk, CT.
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.