Private Company Council

December 16, 2019

The Private Company Council (

PCC

) met on Monday, December 16, 2019. Below is a brief summary of issues addressed by the PCC at the meeting, categorized by project:

• PCC Issue No. 2018-01, “Practical Expedient to Measure Grant-Date Fair Value of Equity-Classified Share-Based Awards” : The PCC and the Board continued their discussion from the September 2019 PCC meeting about a potential practical expedient in which the current price for equity-classified share-option awards could be determined using a valuation that meets the requirements of Section 409A of the U.S. Internal Revenue Code. The PCC and the Board discussed whether and how the practical expedient (1) would differ from current practice and (2) could reduce the cost and complexity associated with determining the current price input. The PCC unanimously voted to move forward with the project and asked the staff to draft an Exposure Draft to be submitted for endorsement by the Board.
• Identifiable Intangible Assets and Subsequent Accounting for Goodwill: The PCC and the Board discussed feedback received from the Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill, as well as from the November 2019 public roundtable meetings. The PCC provided insight on questions of comparability and operability, and several PCC members indicated that if there is a change in the subsequent accounting for goodwill for public business entities, the private company goodwill alternative should not be amended.
• Distinguishing Liabilities from Equity (Including Convertible Debt): The PCC and the Board discussed feedback received on the proposed Update, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The PCC expressed overall support for the Board’s decisions. Several PCC members recommended the Board consider an effective date for private companies that is two years after the effective date for public business entities in its upcoming redeliberations.
• EITF Issue No. 19-C, “Warrant Modifications: Issuers’ Accounting for Modifications of Equity Classified Freestanding Call Options That Are Not within the Scope of Topic 718, Compensation—Stock Compensation, or Topic 815, Derivatives and Hedging”: The FASB staff provided an overview of the project and solicited feedback from PCC members on an issuer’s accounting for equity-classified warrant modifications. Certain PCC members discussed their experience in warrant modification transactions, acknowledged the diversity in practice, and provided their views on common analogies made due to the lack of authoritative guidance.
• Simplifying the Balance Sheet Classification of Debt: The PCC and the Board discussed feedback received on the revised proposed Update, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet (Current versus Noncurrent). Certain PCC members noted areas of concern on unused long-term financing arrangements and the potential increase in the cost of debt issuance but, overall, PCC members continued to express general support for the project.

The next PCC meeting will be held on Thursday, April 16, 2020, and Friday, April 17, 2020, in Norwalk, Connecticut.

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.  

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Joint Meeting of the Private Company Council (PCC) and the FASB's Small Business Advisory Committee (SBAC)

PRIVATE COMPANY COUNCIL/SMALL BUSINESS ADVISORY COMMITTEE JOINT MEETING

MEETING RECAP

December 17, 2019

The Private Company Council (

PCC

) and the Small Business Advisory Committee (

SBAC

) jointly met on Tuesday, December 17, 2019. Below is a brief summary of the issues addressed by the PCC and the SBAC at the joint meeting:

• Reference Rate Reform: Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting: The FASB staff updated the PCC and the SBAC on the Board’s recent decisions. The PCC and the SBAC discussed the extent of general awareness of the issue and noted a varying degree of preparation among small public and private companies for the transition.
• Equity Method Accounting for Investments: The PCC and the SBAC discussed potential areas of simplification for the equity method of accounting for investments. Several members of both advisory groups noted that while measuring equity method investments at fair value through earnings could provide decision-useful information, there may be incremental costs associated with that change. Some members expressed concern that application of the measurement alternative in the absence of a readily determinable fair value could result in the loss of decision-useful information. Although some members of the advisory groups supported a potential simplification, the overall sentiment of the group was to maintain the existing equity method of accounting.
• Leases (Topic 842): The PCC and the SBAC discussed their current implementation progress and experience with the Leases standard. In addition, the members discussed the costs and benefits of applying the standard, with a focus on the initial costs incurred to implement the standard and expectations for ongoing costs. In addition, SBAC members emphasized the importance of having an overall implementation plan and shared their views and potential alternatives on implementation issues related to determining the incremental borrowing rate. SBAC members also shared their observations about identifying embedded leases and acknowledged that the same application questions existed under the prior lease accounting requirements.
• Revenue from Contracts with Customers  (Topic 606): The PCC and the SBAC discussed their current implementation progress and experience with the Revenue Recognition standard. Several members from both advisory groups agreed that companies generally underestimated the time and effort required to appropriately implement the standard, which contributed to a lag in implementation. Users from both advisory groups commented on the benefits of the enhanced disclosures provided by this standard.
• Identifiable Intangible Assets and Subsequent Accounting for Goodwill: The PCC and the SBAC discussed feedback received from the Invitation to Comment, Identifiable Intangible Assets and Subsequent Accounting for Goodwill, as well as from the November 2019 public roundtable meetings. Members of the advisory groups focused on issues related to comparability and operability, including how a potential goodwill amortization period should be determined and whether the private company goodwill alternative should be amended if the guidance for public business entities changes.  Many members of both advisory groups prefer a simplified amortization approach for goodwill accounting, noting that the information about goodwill and its impairment is only useful to certain financial statement users and relevant for a limited period of time.   
• Accounting by a Joint Venture for Nonmonetary Assets Contributed by Investors: Several members from both advisory groups provided feedback on potential alternatives related to the accounting for nonmonetary assets contributed to a joint venture in a standalone joint venture’s financial statement. Generally, members supported accounting for contributed nonmonetary assets at fair value, given the economics of the formation of a joint venture, the venturer’s accounting requirements, and the costs and benefits of providing that information.

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Small Business Advisory Committee

December 17, 2019

The

Small Business Advisory Committee

(SBAC) met on December 17, 2019. At the meeting, the SBAC members provided input on the following topics:

For more information the Small Business Advisory Committee, visit the

FASB website

.  

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Friday Footnotes: Are Accounting Students Prepared?; New CPE Rules; Blockchain Blah Blah Blah | 12.20.19

Regarding CPA Exam Performance and the Accounting Curriculum [The CPA Journal] A letter to the editor from a professor at Iona College reads: “In the end, I think too much emphasis is placed on pass rates and average scores, rather than the simple question of whether the students pass the exam in a reasonable period. The data that exists on pass rates and average scores is useful, but not determinative. Students who wait until they are fully prepared and confident before taking sections of the exam run the risk of extending the amount of time it takes to complete all sections.”

Adaptive learning self-study enabled in new CPE provider rules [Journal of Accountancy] Rules for continuing professional education providers for CPAs have been changed to accommodate adaptive learning self-study programs and address other issues. The National Association of State Boards of Accountancy (NASBA) and the AICPA announced that they have approved revisions to the Statement on Standards for Continuing Professional Education (CPE) Programs and the NASBA Fields of Study document.

How this startup by ex-KPMG exec is providing payments solution to credit-starved merchants [YourStory] Today, we are living in a society driven by technology, which in turn is transforming the business and customers. But for 47-year-old Jaijit Bhattacharya, tech-led societal transformation has been the proverbial Gordian Knot. Jaijit always believed that the financially abundant have access to systems, processes, and technology that a majority of the population does not have access to.

Ex-WorldCom CEO released from prison early [Compliance Week] Former WorldCom CEO Bernard Ebbers was granted early release from prison due to deteriorating health. Ebbers had served 13 years of a 25-year sentence for participating in one of the biggest accounting frauds in U.S. history.

The Need for New Skill Sets at CPA Firms is on the Rise [AccountingWeb] “Companies are being expected to report on things they never had before, things that are not on a traditional financial statement. How we touch these as a profession has become critically important,” said Melancon. “We have to unlearn what we know and relearn with the audit and standards. Tax compliance and planning, business reporting and analytics and information systems and controls will all be necessary as core learning for CPAs.”

Purdue Pharma Can Use EY as Auditor Despite Objection from U.S. [Bloomberg Law] U.S. Bankruptcy Court Judge Robert D. Drain cleared the way for Purdue Pharmato hire Ernst & Young as its financial statement auditor at a hearing Thursday, overruling an objection from the U.S. Trustee. The U.S. Trustee objected to the hire because EY also provides services to other businesses owned by the Sackler family, which owns Purdue, arguing that that relationship could skew the auditor’s incentives.

Blockchain snuck up on us [Accounting Today] Did it really tho?

The Beginning of the End of Tax Secrecy [Wall Street Journal] This week, Royal Dutch Shell voluntarily published its revenue, profit, taxes and other business details in each of 98 countries. The disclosure aligns with a drive by the energy company, which often attracts criticism from environmental activists, to present itself as forward-thinking, transparent and socially-minded. That didn’t stop the information feeding a predictable host of headlines in the U.K., where the company is partly based, that it didn’t pay taxes in the country (because of losses carried forward and tax refunds). In the U.S., Shell accrued $137 million of tax—a rate of 8%.

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2020 GAAP Financial Reporting Taxonomy and SEC Reporting Taxonomy Now Available

2020 GAAP Financial Reporting Taxonomy and SEC Reporting Taxonomy Now Available

Norwalk, CT, December 20, 2019

—The Financial Accounting Foundation (

FASB

) today announced the availability of the

2020 GAAP Financial Reporting Taxonomy

(Taxonomy) and the

2020 SEC Reporting Taxonomy

(SRT), along with the new

2020 XBRL US DQC Rules Taxonomy

(DQCRT). All taxonomies are pending final acceptance by the U.S. Securities and Exchange Commission (

SEC

).

The 2020 Taxonomy contains updates for the accounting standards and other recommended improvements. The 2020 SRT contains improvements to the dimensional elements whose underlying recognition and measurement are not specified by the GAAP but are elements commonly used by GAAP filers.

The DQCRT is a FASB taxonomy that includes in a derivative format XBRL US DQC Rules (DQCR) published by the XBRL US as validation checks for XBRL filings with the SEC. The purpose of the DQCRT is to improve exposure to and compliance with the DQCRs. This initial implementation is limited to three DQCRs. Over time, additional DQCRs are likely to be included.

The 2020 taxonomies are expected to be accepted as final by the SEC in early 2020.

The taxonomies are available on the

FASB’s Taxonomy

(XBRL) pages and through the following links:

2020 GAAP Financial Reporting Taxonomy

,

2020 SRT

, and

2020 XBRL US DQC Rules Taxonomy

.  

Questions about using the Taxonomies and creating and submitting XBRL tagged interactive data files in compliance with SEC rules should be directed to the SEC. SEC details and guidance are available at the

SEC’s portal on Structured Data

.  

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The FASB Did Not Pick You to Be Its Next Chairman

Unless your name is Richard Jones and you’re chief accountant and partner at Ernst & Young, then the FASB did pick you, congratulations.

Richard Jones

Jones will succeed nice neighborhood dad Russell Golden after Golden’s term ends on June 30.

Golden, a former Deloitte partner, has served as FASB chairman since July 1, 2013.

Jones looks the part of a FASB chairman, as he has a propensity for wearing blue button-down shirts with ties just like his predecessor.

But he also has the resume to back up that buttoned-down look:

Mr. Jones has worked at EY since 1987. He has held several titles at the firm, including assurance staff and senior manager to director of consultations. In 2014, he was appointed to his current role as chief accountant and partner.

The incoming chairman will serve a seven-year term with no option for renewal, according to FAF spokesman Matthew Broder. Mr. Golden initially served a three-year term, followed by a four-year renewal.

Jones is very familiar with the crew in Norwalk, CT, as he served on the Financial Accounting Standards Advisory Council (FASAC) from 2016 to 2018. He also was a member of the AICPA’s Accounting Standards Executive Committee from 2003 to 2008.

He is expected to join the FASB in early 2020 so Russ can show him the ropes.

To those who didn’t get chosen by the FASB, better luck next time. Try back again in seven years.

EY Chief Accountant To Become Next FASB Chairman [Wall Street Journal]

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Here’s Your Open Thread For the Fourth and Final CPA Exam Score Release of Q4 2019

Welp, that’s it. It’s over. Whatever your CPA exam plans were for 2019, I sure hope you got done what you wanted to do because there are no more chances left for the year. December 10 was the final testing day of 2019 and this on-time score release yesterday bears the distinction of being the last score release we’ll see this decade. Man, time flies when you’re having a terrible time.

On December 19, 2019, NASBA received and processed the following scores from the AICPA. pic.twitter.com/PjrYj4Ruow

— NASBA (@NASBA) December 19, 2019

There’s not a whole lot to say here, so here’s a helpful video from NASBA on what to do now that you’ve gotten your score.

Hope you guys waiting for scores got some good news this week. If not, go ahead and take a nice relaxing break before you get back on that horse come 2020. You got this.

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