Private Company Council Meeting Recap
September 11, 2019
The Private Company Council (PCC)
met on Wednesday, September 11, 2019. Below is a brief summary of
issues addressed by the PCC at the meeting, categorized by project:
- Practical Expedient to Measure Grant-Date Fair Value of Equity-Classified Share-Based Awards:
The PCC and the Board continued their discussion from the June 2019 PCC
meeting about a potential practical expedient that would allow private
companies to use the exercise price of their equity-classified
traditional share-option awards as the current share price input for
purposes of determining the grant-date fair value of such awards.
The staff provided the PCC with an overview of outreach performed since
2013 on the topic of share-based compensation as well as a detailed
analysis of recent outreach with private company practitioners and
preparers. Several Board members expressed concern with: (1) whether the
identified issue was pervasive and (2) whether, and how, a practical
expedient could reduce the cost and complexity associated with
determining the current share price input. The PCC and the Board
discussed an alternative practical expedient where the current price for
equity-classified share-option awards could be leveraged from a
valuation that meets the requirements of Section 409A of the United
States Internal Revenue Code. With the support of Board members, the PCC
directed the staff to (1) draft language for the potential practical
expedient and (2) identify additional issues that need to be considered
by the PCC at a future meeting.
- Implementation Topic—Leases: The PCC and the Board discussed private company implementation activities related to Update No. 2016-02, Leases (Topic 842),
including a dialogue regarding the determination of a lease term in
related party lease arrangements and the complexity associated with
- Identifiable Intangible Assets and Subsequent Accounting for Goodwill: The PCC and Board discussed the Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill.
The PCC generally supported the project and provided wide-ranging
feedback on the characteristics of goodwill amortization and the
potential effects of the project on the existing private company
- Simplifying the Balance Sheet Classification of Debt: The staff provided the PCC with an overview of the upcoming revised proposed Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent),
resulting from this project. The PCC and the Board discussed the
settlement of debt through the issuance of equity and whether the
purpose of debt classification should be to signal when or how
the debt will be settled. Several PCC members expressed continued
support for the decisions reached on unused long-term financing
- Distinguishing Liabilities from Equity (Including Convertible Debt): The PCC and the Board discussed the proposed Update, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting
for Convertible Instruments and Contracts in an Entity's Own Equity.
The PCC expressed its general support for the simplifications for
private companies that would be provided by the amendments resulting
from the proposed Update.
- Reference Rate Reform: Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting: The staff provided PCC members with an overview of the recently issued proposed Update, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
PCC members discussed the progress of transition away from rates
expected to be discontinued as a result of reference rate reform. The
PCC and the Board emphasized the importance of making private companies
aware of the upcoming change to reference rates and discussed ways to
ensure the message reaches a wide range of stakeholders.
- Effective Date Philosophy: The staff provided PCC members with an overview of the proposed Update, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates.
The PCC expressed its overall support for the proposed philosophy and
provided feedback in response to questions about both the two-bucket
approach and the appropriate effective date for private company interim
The next PCC meeting will be held on Monday, December 16, 2019, and Tuesday, December 17, 2019, in Norwalk, Connecticut.