April 22, 2022

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FASB Exposes Private Company Decision-Making Framework for Public Comment

The FASB, along with the Private Company Council (PCC), has issued an Invitation to Comment: Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies, seeking stakeholder input on the proposed private company decision-making framework. The framework is intended to serve as a guide for the FASB and the PCC in determining whether and in what circumstances to provide alternative recognition, measurement, disclosure, display, effective date, or transition guidance for private companies reporting under U.S. generally accepted accounting principles (GAAP). Comments on the proposed framework are due June 21, 2013.

The FASB and the PCC developed the proposed provisions contained in the Invitation to Comment based on their discussions at the PCC’s February 2013 meeting. During that meeting, the FASB and the PCC deliberated stakeholder feedback on the FASB’s July 2012 Invitation to Comment, which contained initial FASB staff recommendations about the creation of a private company decision-making framework. As a result of their February discussions, the FASB and the PCC made changes to that original proposal, including:

  • Removing the industry-specific presumption by having the Board and the PCC consider whether the same industry-specific guidance is relevant to users of the financial statements of both public companies and private companies; and
  • Allowing a private company to select the alternatives within U.S. GAAP for recognition or measurement guidance that it deems appropriate, without having to apply all the alternatives within U.S. GAAP for recognition and measurement.

The FASB’s News Release is available here.

The Invitation to Comment is available here.

The FASB’s In Focus publication on the Invitation to Comment is available here.

Affordable Housing Projects - FASB Issues Proposal for Investments in Affordable Housing Projects

The FASB has issued proposed Accounting Standards Update (ASU), Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects. The proposed ASU is from EITF Issue No. 13-B, “Accounting for Investments in Qualified Affordable Housing Projects,” ratified as a consensus-for-exposure at the FASB’s March 28, 2013, meeting. The amendments in this proposed ASU would permit reporting entities that invest in a qualified affordable housing project through a limited liability entity to elect to account for the investment using the effective yield method if all of the following conditions are met:

  • It is probable that the tax credits allocable to the investor will be available.
  • The investor retains no operational influence over the investment other than protective rights, and substantially all of the projected benefits are from tax credits and other tax benefits (e.g., tax benefits generated from the operating losses of the investment).
  • The investor’s projected yield based solely on the cash flows from the tax credits and other tax benefits is positive.
  • The investor is a limited liability investor in the affordable housing project for both legal and tax purposes, and the investor’s liability is limited to its capital investment.

For those investments in qualified affordable housing projects not accounted for using the effective yield method, the investment would be accounted for as an equity method investment or cost method investment in accordance with Topic 970, Real Estate—General, Subtopic 323.

The decision to apply the effective yield method of accounting will continue to be an accounting policy decision rather than a decision to be applied to individual investments that qualify for use of the effective yield method.

Comments on this proposed ASU are due June 17, 2013.

The Proposed Accounting Standards Update EITF-13B —Investments —Equity Method and Joint Ventures (Topic 323) is available here.

FASB Issues Additional Proposal on Financial Instruments

The FASB has issued a proposed Accounting Standards Update (ASU), Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities - Proposed Amendments to the FASB Accounting Standards Codification™. This is a companion document to proposed ASU, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (proposed ASU on financial instruments), which was issued on February 14, 2013. The companion document includes the following:

  • Consequential amendments to various Codification Topics that are affected by the proposed ASU on financial instruments; and
  • Amendments to Subtopic 825-10 to reflect the FASB’s decision to eliminate the fair value options for financial instruments that are not in the scope of the proposed ASU on financial instruments.

Comments on the consequential amendments exposure draft are due Wednesday, May 15, 2013.

The companion document is available here.

The proposed ASU on financial instruments is available here.

GASB Issues Revised White Paper

The Governmental Accounting Standards Board (GASB) has released the revised White Paper, Why Governmental Accounting and Financial Reporting is – and Should be - Different. This paper discusses the need for separate standards for governments. According to GASB, it illustrates some of the differences between standards for governments and those for business enterprises and explains why standard setting for governments is an ongoing process. The scope of this paper is limited to comparing accounting and financial reporting standards for state and local governments to those required for business enterprises.

The GASB White Paper is available here.

PCAOB Announces Forums on Small Business Auditing

The PCAOB has announced the dates for the 2013 sessions of its annual forums on Auditing in the Small Business Environment and has issued the agenda for this year’s first forum.

There will be a total of six forums that the PCAOB views as providing a vital means of communication with small audit firms. The 2013 agenda focuses on fraud, and each case study will incorporate the concepts of remediation and engagement quality review.

The annual PCAOB small business forums are designed to share important information about PCAOB activities with registered public accounting firms that audit clients operating in the small business community. The forums also provide an opportunity for Board Members and PCAOB staff to hear the questions, comments and concerns of auditors.

The first of the six forums for 2013 will be held in Seattle, Washington on Thursday, June 6.  Staff from the Division of Corporation Finance of the Securities and Exchange Commission (SEC) will participate with PCAOB staff in a discussion of the JOBS Act and how it may affect PCAOB standard setting for audits of emerging growth companies.  SEC staff also will provide an update on recent SEC activities and observations about common financial reporting issues facing smaller public companies.

Additional panel discussion topics for the Seattle forum will include:

  • Fraud and professional skepticism;
  • Standard settings updates;
  • Key inspections findings, relevant standards and case studies; and
  • Remediation of firm quality control deficiencies.

Each forum will be hosted by a PCAOB Board Member and is open to PCAOB-registered firms. Although there is no fee charged to participate, attendees must pre-register. Attendees also have the opportunity to earn continuing professional education credits.

The schedule for the 2013 forums includes:

  • Seattle, Wash., June 6
  • Philadelphia, Pa., June 25
  • New York, N.Y., July 18
  • Chicago, Ill., October 2
  • Newport Beach, Calif., November 7
  • Tampa, Fla., December 5

Additional information on Auditing in the Small Business Environment, the schedule for the Forum sessions, and registration information, are available from the PCAOB here.

A news release on the PCAOB Forums on Auditing in the Small Business Environment is available from the PCAOB here.


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