The group tasked with advising the Financial Accounting Standards Board on private company accounting matters, its Private Company Council (PCC), has had a busy summer. At their joint meeting earlier this week, PCC members received updates on, and provided their views on, six major projects at various stages of the FASB’s standard-setting agenda.
The PCC meeting followed a Town Hall which took place earlier this summer in conjunction with the AICPA National Advanced Accounting and Auditing Technical Symposium (NAATS). Also of note is the release for public comment of a FASB proposal earlier this summer which aims to improve and simplify certain consolidation issues for private companies – specifically, accounting for variable interest entities (VIEs).
PCC meets with FASB
Issues discussed at the July 11 PCC meeting included, as summarized in the PCC meeting recap:
Additional information on a couple of the more controversial items taken up at the PCC meeting can be found in, Private Company Council Mutes Criticism of Debt Classification Proposal, Offers Support (Thomson Reuters Tax & Accounting) and FASB eyes cloud computing implementation costs (AccountingToday).
PCC Town Hall at NAATS
The Financial Accounting Foundation (FAF) which oversees the FASB and the Governmental Accounting Standards Board (GASB) has placed a great deal of emphasis on conducting outreach and receiving feedback from PCC members and the private company community (preparers, auditors, lenders and others).
In addition to holding a series of Town Halls around the country, the PCC recently convened a Town Hall at the AICPA NAATS conference – included this year as part of the AICPA Engage conference.
The presentations by FASB board and staff members together with PCC members at the NAATS program can be viewed in PCC-NAATS Town Hall Video Part 1 and Part 2.
Looking ahead, the next private company town hall meeting hosted by the FASB and PCC is slated to take place on August 31, 2017, in conjunction with the Georgia Society of CPAs. Learn more about FASB’s PCC.
Comments due on VIE proposal by Sept. 5; Pay attention to scope
FASB’s proposal that would amend reporting by private companies with respect to VIEs, issued earlier this summer, carries a comment deadline of September 5.
Alternative accounting treatments are recommended by the PCC for the FASB’s consideration, and then proposed if the FASB concurs with the recommendation and believes the resulting treatment improves financial reporting. The express hope is often that such alternatives will simplify reporting and rationalize the cost-benefit equation, but the overriding determination by the FASB is based on usefulness of the resulting reporting to users of private company financial reporting.
The proposal aims to simplify consolidation reporting in the complex and, some may say, vexing area of VIEs.
We noted in our earlier post on the VIE proposal that a key consideration in the applicability of this proposed simplification is the status of both the parent company and the legal entity being evaluated for consolidation; if either the parent or the entity being considered for consolidation meets FASB’s definition of ‘public business entity” then the simplified alternative may not be applied.
As reported by Bloomberg BNA in Private-Company Relief From Accounting Consolidations Coming, FASB Vice Chair Jim Kroeker commented on the then-upcoming VIE proposal back in May, “The benefits are justified in this case by a reduction in the cost. I support moving forward. I do struggle a little bit with the scope and whether or not we should limit thee decisions only to private companies.”
Further on the subject of the scope of private company alternatives, including the effective dates of the FASB’s new revenue recognition standard for public vs. private companies, see the discussion of SEC, GAAP rules collide, in BNA’s Revenue Recognition Highlights: June, 2017.