FASB and PCC Finalize GAAP Framework for Private Companies
by Terri Eyden on
By Jason Bramwell
A decision-making framework that outlines criteria to determine whether and in what circumstances it is appropriate to adjust financial reporting requirements for private companies following US Generally Accepted Accounting Principles (US GAAP) was finalized by the Financial Accounting Standards Board (FASB) and the Private Company Council (PCC) on July 16.
The Private Company Decision-Making Framework will aid the FASB and the PCC in identifying opportunities to enhance the relevance of accounting standards to users as well as to reduce the cost and complexity of preparing private company financial statements in accordance with US GAAP. The framework is expected to be issued by the end of the summer.
In December 2012, the FASB met with the PCC for the first time to discuss feedback that was provided during an initial comment period on the proposed framework in July 2012. The Financial Accounting Foundation – the FASB's parent organization – created the PCC in May of that year to work with the FASB to determine whether and when to modify US GAAP for private companies.
This past April, the FASB issued a second invitation to comment on the decision-making framework, in which private company stakeholders had until June 21 to offer their input.
PCC Town Hall Meeting
The PCC will play host to a public roundtable and town hall meeting on November 4 at Ohio State University in Columbus, Ohio.
The purpose of the meeting is to seek input from private company stakeholders on issues affecting them, the PCC's projects to date, and the FASB's projects impacting private companies.
The FASB and the PCC have taken measures recently to enhance the relevance and reduce the complexity of certain standards for private companies that prepare US GAAP–based financial statements.
On June 10, the FASB endorsed three accounting proposals from the PCC, which involve intangible assets acquired in business combinations, goodwill, and certain types of interest rate swaps. Stakeholders have until August 23 to provide comments on the exposure drafts for the three proposals.
A fourth accounting proposal, an alternative within US GAAP for applying consolidation guidance for leasing entities under common control, was discussed by the FASB and the PCC on July 16.
The proposed GAAP alternative – PCC Issue No. 13-02, Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements (formerly FIN 46[R] and FAS 167) – would exempt private companies from applying the consolidation guidance for variable interest entities under common control leasing arrangements, according to the FASB.