Jere Shawver, the chair of the Private Company Council that advises the Financial Accounting Standards Board, is on a mission to increase awareness of the group that represents the perspectives of privately held companies and attract greater participation from its constituents.
Shawver took over in 2024 as the third leader of the PCC since it was founded 14 years ago. He was formerly CEO of Baker Tilly US LLP, the audit and assurance side of the Top 10 Firm. He retired last May from Baker Tilly, about a year after it
"I had been introduced to the FAF, the FASB and the PCC a couple years ago and asked about coming in and taking on the chairman role as a part of my post-retirement plans," he told Accounting Today in an interview last week. "As a practitioner, I did both private and public company practice."
He takes a traditional approach to accounting. "I'm an accountant that believes ultimately the world 'foots' to zero, which means all the debits and credits need to match," said Shawver. "I don't think there should be a lot of variability in what accounting looks like between public and private companies anywhere in the world. All we're doing is counting money, and the sum of money is the same regardless of what accounting standard you're using."
PCC history
The PCC
"The creation came about because in the early aughts, the FASB was not paying enough attention to private companies," said Shawver. "There also were probably four times as many public companies as there are today. That market has shrunk, but the focus and energy all went to what public companies were doing, and there was a debate in the marketplace over big company or little company GAAP. Ultimately, it was appropriately concluded that we don't need different ones, but we might need options, so let's create the PCC. We have an independent board. We are separate from the FASB. We work closely together. The members are appointed separately. We're not appointed by the FASB, but they're really our customer because we advise them about how standards impact private companies. We can also set our own agenda in addition to what the FASB sets."
Under the two earlier chairs, Billy Atkinson and Candace Wright, Shawver noted that the PCC made some important accomplishments in its first seven or eight years in areas such as goodwill and other alternatives.
The PCC is in a position to advise FASB about whether some practical expedients might make the standards easier for private companies to implement and get the same information that's provided by public companies, he added. In a private company, most of the users of the financial statements are lenders who already meet with management on a regular basis. They can ask questions of business owners that typical retail investors in public companies generally aren't in a position to ask.
Private equity
Despite the growing role of private equity investment in both the accounting sector and other industries, Shawver doesn't see PE investors as one of the PCC's main constituencies.
"They're sophisticated buyers and investors, and their goal is to sell that asset," he said, adding that he is speaking for himself, not for the PCC. "I think most private equity invested companies should probably follow public company reporting because that's going to be either a strategic investor or a public offering. Sophisticated users are going to expect you to account for things the way the most sophisticated companies do."
He sees PE as the new form of public company as private equity firms have acquired so many businesses that might have gone public 30 years ago. FASB regularly updates the PCC about its activities, such as the research on the accounting for digital assets that FASB was tasked with doing by the White House in a
Leases and credit losses
Another part of the PCC's agenda involves looking at existing standards and the current circumstances and evaluating whether there should be some differences. That includes the leases standard, which FASB finalized in 2016 after a decade of convergence work with the International Accounting Standards Board. Both FASB and the IASB decided to put leases on the balance sheet, but differed in some important ways on their final standards. FASB
"We are still learning about some of the challenges that private companies actually have in implementation," said Shawver. "There's historically been a view that we should allow private companies to have longer to implement than public companies because they'll learn what public companies have done, and it will help the implementation. I'm a skeptic on how effective that is."
He doesn't see private companies adopting new accounting standards quickly if they don't need to because they would prefer to spend their money on more pressing matters such as gaining new customers. But once they need to adopt the new standards, they find out what the issues are.
"In the last 24 months, we've heard a lot of discussions around them, and I would say those discussions probably peaked last summer," said Shawver. "As we look at what we might do additionally for leases for private companies, the feedback we're starting to hear in these last five or six months is we don't love it, but we understand it now, so don't change it. Even if you're contending that you're changing it for something that will be good for us, we're not sure we will be and it might be harder for us to adopt."
The PCC nevertheless is continuing to investigate making changes in some areas, such as the concept of "embedded leases," provisions within larger contracts that are not explicitly labeled as leases, as well as lease modifications.
"We're looking at how you might deal with modifications of leases," said Shawver. "Should that be different for private or public companies? Those are some research topics we still have."
Last year,
"When the revenue recognition standards came out, one of the things that it required companies to do was to consider macroeconomic environment issues in evaluating what their reserves against uncollectible accounts receivable are," said Shawver. "It was a required step that you had to consider your management's expectation of future macro economic conditions. Your typical tire wholesaler or distributor in Pittsburgh, Pennsylvania, probably isn't in a position to be evaluating a lot of macroeconomic environmental issues. They don't have the manpower, nor do they care. There are banks and large companies that have lots of receivables in lots of places. It's clearly understandable that they would need it, but for a locally owned business, there really aren't a lot of macroeconomic conditions. And so this became a check-the-box process for smaller companies. They would write something that said they'd done it, and then establish their receivable reserves, as they had before."
The PCC recommended changing the standard to allow private companies to adopt a practical expedient to use subsequent collections. FASB expanded that to include not-for-profit organizations, but public companies still have to evaluate the macroeconomic environment. Nonprofits and private companies can use the alternative expedients.
Consciousness raising
Soon after he started his role with the PCC, Shawver met with each of the board members at FASB and came away with the impression that the role of the PCC hadn't been given much emphasis, as reflected in a
"What I heard in my one-on-one conversations and what they learned in this bigger process is we had done a horrible job of telling people what the PCC had accomplished," said Shawver. "If we made a recommendation that the FASB embedded in a pronouncement that came out, the PCCs role was highlighted in the 'basis of conclusions,' which is like the back of the appendix. Real nerds — I would be one of those — would read the basis of conclusions. Nobody else does."
In response to the feedback received on the FAF report, the PCC released its
"I want us to be creating a routine and a regimen that continues to have the PCC visible about what we're doing," said Shawver. "We hold a lot of town halls, and we have conversations with industry user groups. Hearing what they think is such an important part of what we do. The PCC has been doing that for a decade. They've been meeting with these people. But I don't think we took credit for the fact that we talked to them about what their issues are, we tried to understand what alternatives existed, if any, and then we responded. That's the part I would like to make sure survives me, that we are in a position to take credit for the good work we're doing."
