The Private Company Council (PCC) asked FASB's staff to analyze a possible elimination of the preferability requirement for private companies when electing to use the PCC's GAAP alternatives for the first time.
Waiving the preferability requirement would allow a private company to elect at any time any of the four PCC-originated alternatives, as long as it's a first-time election.
The preferability requirement is found in Topic 250, Accounting Changes and Error Corrections, of the FASB Accounting Standards Codification. It permits the use of an allowable alternative accounting principle on the basis that it is preferable.
Proponents of a first-time, unconditional option for the PCC alternatives have expressed concern that private companies sometimes experience changes in circumstances that would have led them to adopt a PCC alternative if the changes had occurred before the effective date.
FASB's staff recommended in a staff paper that the PCC provide companies with an unconditional option to make a first-time election of a private company alternative.