The Private Company Financial Reporting Committee discussed proposed accounting standards for revenue recognition, leasing and investment properties during a meeting with members of the Financial Accounting Standards Board.

According to PCFRC chair Judy O’Dell, the two-day meeting last Thursday and Friday in Las Vegas differed from most of the committee’s meetings as there were no open exposure drafts to discuss on which to issue any comment letters. She said she has noticed other changes at the meeting lately too, with FASB staff getting more directly involved with the work of the committee and making themselves more available.

“There are some internal changes at FASB that are very, very good from a private company standpoint,” said O’Dell. “There is now a team of about eight people at FASB solely dedicated to private company issues, and they are embedded in each one of the projects.”

During the course of the meeting, as the PCFRC discussed each of the open projects, the project manager and sometimes another staff person phoned into the meeting. FASB board member Marc Siegel and assistant director Jeffrey Mechanick were present at the meeting, in addition to other FASB staff members and American Institute of CPAs staff.

The PCFRC is a FASB advisory committee that receives administrative support from the AICPA, and has traditionally provided input to FASB on the concerns of private company constituents. However, FASB has recently increased its outreach to private companies in the wake of a report by the Blue-Ribbon Panel on Standard Setting for Private Companies, which recommended that a separate board independent of FASB set accounting standards for private companies. A trustee working group at FASB’s oversight body, the Financial Accounting Foundation, is expected to issue its proposals in the next few weeks on any possible changes in the structure of the board or the standard-setting process (see FAF Group Plans Changes in Accounting Standard-Setting).

At the meeting last week, the PCFRC discussed a few minor topics related to the revenue recognition project, for which a new re-exposure draft should be out shortly. Another exposure draft is due soon on investment property. The committee also talked at length with FASB about an upcoming re-exposure draft of the leasing standards project.

The committee also spent time discussing FASB’s paper on setting up a differential standard-setting framework for private company standards, which came out in response to the Blue-Ribbon Panel report (see FASB Developing Framework for Private Companies).

“We discussed some of the issues about users of private company financial statements and how they’re different,” said O’Dell. “Obviously we’re very much in favor of [the differential framework] and we’ve been working with staff to shape it. We think that it will be very useful to the board when they’re considering private company issues that they will have a framework to make some decisions against. We don’t know what final form it’s going to take. The final product might be a decision tree, or it might be a conceptual statement. At this point, we don’t where that particular line of thought will go, but already the board is beginning to think about it and use it. We will have some exemptions from some disclosures within the revenue recognition project that have been proposed, perhaps some in the leasing project, and this is brought about by being able to have a framework to make decisions against.”

On the second day of the meeting, the PCFRC did a kind of rehearsal for the roundtables that FASB is planning to hold in Chicago and San Francisco with private companies. FASB posed some of the questions planned for those roundtable discussions to members of the PCFRC. They talked about some of the remaining problems with variable-interest entities and what place fair value has in private company financial statements.

“There was no decision, but it was more of an opportunity for the members of the PCFRC to make their views known,” said O’Dell. They also had a side discussion on interest rate swaps and how they work with two commercial bank lenders.

The next meeting is planned for November 17-18 at FASB’s offices in Norwalk, Conn. By that time, the trustee working group’s report should be out with proposals for changes on how private company and not-for-profit accounting standards should be set. O’Dell is not sure what to expect in the proposals, but she anticipates it will be one of the topics of discussion. Also on the agenda are discussions of the exposure drafts on revenue recognition and investment properties, which should be out by then.

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