Private Company Council Holds Inaugural Meeting, Identifies Four Areas for Study
Norwalk, CT, December 6, 2012—At its inaugural meeting today, the Private Company Council (PCC), a new body created to improve the standard-setting process for private companies, identified four areas to research for agenda consideration. The areas involve consolidation of variable interest entities; accounting for “plain vanilla” interest rate swaps; accounting for uncertain tax positions; and recognizing and measuring, at fair value, various intangible assets (other than goodwill) acquired in business combinations.
“These four areas are often top of mind for users, preparers, and auditors of private company financial statements,” said PCC Chairman Billy M. Atkinson. “We are eager to review the research, and we look forward to discussing the issues in more detail at our next meeting in February. After we discuss these issues further, we’ll make a decision about which projects to add to the PCC agenda.”
The PCC was established in May by the Board of Trustees of the Financial Accounting Foundation (FAF) to work with the Financial Accounting Standards Board (FASB) to determine whether and when to modify U.S. Generally Accepted Accounting Principles (GAAP) for private companies.
During the PCC’s first meeting, FASB staff members presented to the PCC issues identified as being of concern by constituents providing written input to the Blue-Ribbon Panel on Standard Setting for Private Companies in 2010, and by participants in private company roundtables held in 2010 and 2011. The PCC directed the FASB staff to develop agenda research memoranda on:
Accounting Standards Codification (ASC) Topic 810, Consolidation (formerly FIN 46(R) and FAS 167), which involves financial reporting by companies involved with variable interest entities (organizations in which the investor holds a controlling interest that is not based on the majority of voting rights).
Accounting for “plain vanilla” interest rate swaps, which are used to convert variable interest rates on loans to fixed interest rates, and vice versa, as referenced in ASC Topic 815, Derivatives and Hedging (formerly FAS 133).
ASC Topic 740, Income Taxes (formerly FIN 48), which is intended to increase relevance and comparability in reporting information about uncertain tax positions.
Recognizing and measuring various intangible assets (other than goodwill) acquired in business combinations, including providing Level 3 fair value measurements and disclosures associated with them, as referenced in ASC Topic 805, Business Combinations and ASC Topic 350, Intangibles-Goodwill and Other (formerly FAS 141(R) and FAS 142)..
The following items were also addressed during the inaugural meeting:
The official transition from the Private Company Financial Reporting Committee (PCFRC), including a report which summarizes recent PCFRC activities, lessons learned, and suggestions on FASB projects that the PCC may want to monitor
An update on the FASB’s private company decision-making framework Invitation to Comment, including a summary of outreach and feedback
A discussion on the current FASB project on going concern.
“We are very pleased to see the PCC off and running—tackling the critical financial reporting issues facing private companies,” said FAF President and CEO Teresa S. Polley. “This Council represents a critical milestone along our journey to improve financial reporting for private companies, and today is the first step in our journey. We are confident that the spirit of cooperation between the PCC and the FASB will carry us through and, more importantly, result in significant progress.”
All PCC meetings will be archived on the FAF website. The meeting handouts for the inaugural meeting can be found here.
The FAF is responsible for the oversight, administration, and finances of both the Financial Accounting Standards Board and its counterpart for state and local government, the Governmental Accounting Standards Board. The FAF also is responsible for selecting the members of both Boards and their respective Advisory Councils.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.