The Private Company Council of the Financial Accounting Standards Board met on April 20 to address various technical matters, including its proposal for an accounting standards update for stock compensation.
Also at the meeting, a Council member summarized financial reporting issues that the Board should consider adding in priority order to its technical agenda. These items, discussed previously during a closed April 19 PCC meeting, include debt modifications, troubled debt restructurings, disclosure materiality, liabilities and equity, variable interest entities, and financial performance reporting.
The Council deliberated issues for its Proposed Accounting Standards Update – Compensation-Stock Compensation (Topic 718): Determining the Current Price of an Underlying Share for Equity-Classified Share-Option Awards.
The Council discussed how the practical expedient should reference the Treasury regulations of section 409A of the US Internal Revenue Code — by direct reference to specific paragraphs, by a summarization of those paragraphs, or by a combination of those two approaches.
The Council unanimously determined that the practical expedient would achieve the project’s intended objectives. At its June meeting, the council plans to discuss a draft of the final update and consider whether to recommend that it be subject to the board’s endorsement procedures.
Board staff discussed “Accounting Standards Update No. 2021-03, Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events,” noting that this accounting alternative should lessen the complexity for private companies and not-for-profit organizations performing goodwill triggering event assessment.
The topic of profits interests and their interrelationship with partnership accounting was addressed, as well. Board staff summarized its outreach with taxation and valuation specialists since a December 3, 2020 PCC meeting.
Council and Board members also discussed financial reporting issues stemming from COVID-19, including disclosures related to COVID-19 and paycheck protection program loan classification.
Council members also gave feedback on their experience implementing “Topic 606, Revenue from Contracts with Customers,” and on the post-implementation review plan for private companies.
In addition, the Board summarized the features of supplier finance programs, gave an overview of the project, and requested comments from Council members on private companies’ use of those programs.
Board staff also provided the Council with an overview of Topic 842, regarding the discount rate for lessees that are not public business entities. That project, added to FASB’s agenda in April, seeks to change the accounting policy election for lessees that are not public business entities to elect to use the risk-free rate as the discount rate by asset class.
Finally, FASB provided the PCC with an update on its project to simplify the balance sheet classification of debt. At an April FASB meeting, the Board removed this project from the FASB technical agenda.
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