December 3, 2020

The Private Company Council (PCC) met on Thursday, December 3, 2020. Below is a brief summary of issues addressed by the PCC at the meeting:
At a future meeting, the PCC will consider expanding the scope of the practical expedient, clarifying the basis of application, and expanding the references to Section 409A.
  • Current Issues in Financial Reporting: FASB staff highlighted that a FASB Staff Educational Paper on Topic 470 (Debt): Borrower’s Accounting for Debt Modifications was recently made available on the FASB website.
  • FASB staff briefly reviewed the Goodwill—Triggering Event Assessment Alternative for Private Companies and Not-For-Profit Entities project, which was added to the Board’s technical agenda in response to feedback received from the PCC and the AICPA’s Technical Issues Committee (TIC), and for which the Board has instructed the staff to proceed with a proposed Update. Given the proximity to year-end, PCC members concurred with the 30-day comment period decided by the Board. PCC members discussed which entities should be included in the scope of the accounting alternative. FASB staff expects the proposed Update to be issued for public comment in mid-December.
  • Identifiable Intangible Assets and Subsequent Accounting for Goodwill: FASB staff provided the PCC with an update on this project, focusing on recent Board discussions. FASB staff gave an overview of the approaches being considered by the Board for amortization periods, including default amortization periods, management-determined amortization periods, and approaches with elements of both. PCC members provided their views on the length of a default amortization period, management deviations from a default amortization period, and whether there should be an imposed cap or floor on an amortization period. PCC members mostly supported a 10-year default amortization period. Some PCC members expressed the need for a floor to be imposed on the amortization period, others did not think a floor would be necessary, and still others preferred that a cap be imposed on the amortization period.
  • Profits Interests and Their Interrelationship with Partnership Accounting: FASB staff briefly summarized the PCC’s prior discussion about profits interests and partnership accounting. FASB staff noted that a working group was formed in August comprising three PCC members and a member of the AICPA’s TIC. The working group currently is conducting outreach with specialists to better understand legal, tax, and valuation issues associated with profits interests. Based on the initial outreach conducted, FASB staff described common valuation methodologies used to measure awards of profits interests and some of the factors that contribute to complexity in practice. FASB staff reiterated that its outreach was in the early stages and would be supplemented by additional outreach and research going forward.
  • Implementation Issues—Revenue: FASB staff provided the PCC with an update of the Revenue Recognition—Practical Expedient for Private Company Franchisors project and the proposed Accounting Standards Update, Franchisors—Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient, whose comment period ended in early November. The project seeks to address certain difficulties private company franchisors experience in applying Topic 606, Revenue from Contracts with Customers. FASB staff briefly summarized the comment letter feedback received and asked PCC members for feedback. Generally, PCC members supported the Board’s efforts to reduce the cost of applying the revenue guidance for private company franchisors.
  • Implementation Issues—Leases: FASB staff provided the PCC with an update on the post-implementation review process and summarized the Board’s discussion at the December 2, 2020 Board meeting. At that meeting, the Board directed the staff to conduct additional research on the practical expedient that allows nonpublic lessees to use the risk-free rate as the lease discount rate. Specifically, the Board requested additional information on the appropriateness of the risk-free rate and whether the practical expedient should be applied at the underlying-class-of-asset level rather than at an entity-wide level. PCC members were supportive of refining the practical expedient and provided feedback on the appropriateness of replacing the risk-free rate with an alternative rate (for example, an A or BBB rate).
  • Disclosure Review—Share-Based Payments: FASB staff provided an overview of this research project and highlighted private company considerations raised during research. PCC members noted that the current required disclosures for private companies generally are not difficult to prepare and those disclosures provide relevant information to users of private company financial statements. Some PCC members indicated that there could be some opportunity to improve certain disclosures required for private companies.
The next PCC meeting is scheduled for Monday, April 19 and Tuesday, April 20, 2021.

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.