June 25, 2020
The Private Company Council (PCC) met on Thursday, June 25, 2020. Below is a brief summary of issues addressed by the PCC at the meeting:
- PCC Issue No. 2018-01, "Practical Expedient to Measure Grant-Date Fair Value of Equity-Classified Share-Based Awards": PCC and Board members discussed the potential practical expedient that would allow a nonpublic entity to determine the current price input of equity-classified share-option awards using a valuation method performed in accordance with the presumption of reasonableness requirements of Section 409A of the U.S. Internal Revenue Code. PCC members decided that the Exposure Draft should be issued for public comment in August 2020. The issuance was previously delayed because of resource constraints faced by many private company stakeholders, which might have affected their ability to provide feedback.
- FASB Accounting Standards Update No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities: FASB staff updated the PCC on the recent release of ASU 2020-05 which amends the effective date of Topic 606, Revenue from Contracts with Customers, and Topic 842, Leases, for certain entities, and provided details about the new effective dates. PCC members expressed broad support for the recent ASU and the relief it provides to private companies.
- Distinguishing Liabilities from Equity: FASB staff provided the PCC with an overview and update on this FASB project. The final Update is expected to be issued in the third quarter of 2020. PCC and Board members discussed how to create awareness among private companies of the Update’s issuance and how the FASB can assist private companies with the implementation process.
- Current Issues in Financial Reporting: PCC and Board members discussed practice issues arising from the current business environment under the COVID-19 pandemic. Topics discussed included borrowers’ accounting for debt modifications and troubled debt restructurings, interim impairment testing of nonfinancial assets, government assistance disclosures, and going concern assessments. FASB resources related to the COVID-19 pandemic can be found here. Furthermore, the Board emphasized that it continues to monitor conditions and stands ready to support private companies encountering technical accounting issues. Board members encouraged PCC members and other stakeholders to continue providing feedback.
- Profits Interests and Their Interrelationship with Partnership Accounting: PCC and Board members engaged in preliminary discussions on private company issues in accounting for awards of profits interests and their interrelationship with partnership accounting. PCC members discussed specific areas such as scope, definition, measurement, and recognition of awards of profits interests. PCC members requested the FASB staff to conduct further research and outreach on those areas for discussion at a future PCC meeting.
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.