PCC Meeting RecapOctober 9, 2018
Tuesday, October 9, 2018, the Private Company Council (PCC) discussed and provided input on the following topics:
PCC meeting will be held on Tuesday, December 11, 2018, in Norwalk,
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.
Implementation: The PCC discussed ongoing lease accounting implementation
activities of the FASB.
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.
Framework: Disclosure Review—Income Taxes: The PCC discussed the
Disclosure Review project relating to Income Taxes, focusing on three main
- 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.
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.