By Anne Rosivach
Private companies and not-for-profit entities can expect to be the focus in many of the deliberations of the Financial Accounting Standards Board (FASB) in 2013 as the result of major decisions made in 2012. Following years of study and debate, the Financial Accounting Foundation (FAF), the oversight body for the FASB, established a Private Company Council (PCC), which met for the first time in December.
The Not-for-Profit Advisory Committee will step up work on its Financial Statement Presentation project, with the support of a newly hired project manager.
These developments and others of interest to nonpublic companies were discussed during a semiannual webcast, IN FOCUS: FASB Update for Nonpublic Entities.
Preliminary Agenda for the PCC
The PCC is the primary advisory body to FASB on private companies for active technical agenda issues. The PCC will engage in "look-back efforts" to identify areas within existing US GAAP where modifications may be appropriate for private companies. Decisions made by the PCC are subject to FASB endorsement and public due process.
Members of the PCC, which is chaired by Billy Atkinson who served on the Blue Ribbon Panel, include private company financial statement preparers, auditors, and users and FASB board members. Two members of the PCC served on FASB's Private Company Financial Reporting Committee, which has been dissolved.
Following discussion of comment letters from constituents, the PPC directed the FASB staff to develop agenda research memoranda on four look-back areas:
- Variable Interest Entities (in ASC Topic 810, Consolidation; formerly FIN 46(R) and FAS 167).
- Accounting for "plain vanilla" interest rate swaps (in ASC Topic 815, Derivatives and Hedging; formerly FAS 133).
- Uncertain Tax Positions (in ASC Topic 740, Income Taxes; formerly FIN 48).
- Recognizing and measuring various intangible assets (other than goodwill) acquired in business combinations (in ASC Topic 805, Business Combinations and ASC Topic 350, Intangibles-Goodwill and Other; formerly FAS 141(R) and FAS 142).
The PCC decided to continue the discussion of the definition of a nonpublic entity. Currently, there are multiple definitions in the codification. The Council also will review the proposed decision-making framework. The next meeting of the new Council will be February 12, 2013.
FASB commenters emphasized the need to avoid an expectations gap.
Not-for Profit Advisory Committee (NAC)
At its September meeting, the NAC discussed the following projects:
- Definition of a nonpublic entity.
- Proposed liquidity risk disclosures.
- Disclosure framework project.
Committee members in general felt that nonprofits should be distinguished from private companies because they are publicly accountable, but a bright line between public and private not-for-profits (NFPs) based on a public accountability notion is unlikely to be helpful, Ron Bossio, FASB Senior Project Manager reported. There should be greater transparency in financial statement presentation by nonprofits.
The NAC agreed that modifications should be on the table. They supported the staff's objectives but not the proposals for the Liquidity Risk Project and the Disclosure Framework Project.
At subsequent meetings, the NAC reviewed progress on the Financial Statement Presentation Project and current practice observations on the Not-for-Profit Financial Reporting: Other Financial Communications Project.
Standards Now Effective
The following Accounting Standards Updates (ASUs) are now effective for nonpublic companies:
- ASU 2011-09, Disclosures about an Employer's Participation in a Multiemployer Plan (ASC 715-80). Annual periods ending after December 15, 2012.
- ASU 2011-08, Testing Goodwill for Impairment (ASC 350). Impairment tests for fiscal years beginning after December 15, 2011.
- ASU 2011-07, Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities. Annual periods ending after December 15, 2012 (and interim periods within those annual periods).
- ASU 2011-05, Presentation of Comprehensive Income (ASC 220). Fiscal years ending after December 15, 2012, except reclassification presentation requirement, which is deferred.
- ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASC 820). Annual periods beginning after December 15, 2011.
- ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements (ASC 860). Interim or annual periods beginning on or after December 15, 2011.
- ASU 2011-02, A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring (ASC 310). Annual periods ending after December 15, 2012 (and interim periods within those annual periods).
Speakers presented brief overviews of the disclosure framework, leases, accounting for financial instruments, liquidity risk and interest rate disclosures, and going concern projects. Most of these projects have been the subjects of individual webcasts.
On the Horizon
In the context of comments from the Securities and Exchange Commission (SEC) that "US-GAAP contains areas such as government grants for which guidance is in need of continued development", FASB has initiated pre-agenda research on accounting for government assistance.
The scope, characteristics, and key terms of this research are:
- The total magnitude and materiality of payments.
- Related accounting guidance.
- Any diversity in accounting practice.
- Other factors important in evaluating the need for a project.
Access slides from the December webcast.
Access the archived webcast.