News highlights for December 2012

The first item of business for the Private Company Council (PCC), which will be chaired by Billy Atkinson, will be working with FASB to continue developing a framework for making decisions about whether and when U.S. GAAP should be modified for private companies.

The PCC—created by the Financial Accounting Foundation (FAF) in part to propose exceptions to GAAP for private companies—will meet for the first time Dec. 6. Atkinson, a former chair of the National Association of State Boards of Accountancy (NASBA), was named chair of the PCC in September as the new council’s membership was revealed by FAF.

FASB is including the PCC in its development of the framework for private company GAAP modifications. FASB issued an Invitation to Comment (ITC) on framework recommendations that were proposed by FASB’s staff but had not been deliberated by the board. The ITC is available at tinyurl.com/8ocscnq; comments were due Nov. 16.

The standard known as FIN 48 is among the first issues Atkinson plans to discuss. Atkinson said FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, has been a concern for private company representatives. He said FIN 48, codified in ASC Topic 740, Income Taxes, received a “mixed review” in FAF’s first post-implementation review of an accounting standard. FAF is FASB’s parent organization.

In addition to FIN 48, Atkinson suggested the PCC would turn its attention early on to:

• Fair value.
• Variable-interest entity consolidation, or FIN 46(R).
• Complexity of derivatives, including simple interest rate swaps used to convert floating rate debt to fixed.
• Accounting for warrants as liabilities.
• Elements of business combination accounting such as separately identified intangible assets.

“Those are what I would refer to as ‘low-hanging fruit,’ ” Atkinson said during a telephone conference with reporters. “It’s my expectation … and those of the stakeholders that we begin to show some progress quickly.”

Atkinson chaired NASBA from 2009 to 2010. He retired from practice after working for 39 years as an audit and risk management partner in PwC’s private company services unit. He also was a member of the Blue-Ribbon Panel on Standard Setting for Private Companies.

During a presentation at the AICPA fall Council meeting, Atkinson said he would favor differential standards for private companies only after exploring with FASB the idea of modifications for all companies—private and public.

Such a broad process would likely be slower than a system in which the PCC simply recommended exceptions or modifications to U.S. GAAP for private companies. During a question-and-answer session following Atkinson’s presentation, AICPA President and CEO Barry Melancon said Atkinson was describing a “fairly lengthy process.”

In the past, Atkinson had opposed differential standards beyond disclosure nuances. Melancon previously said in a statement that he assumed that, during the interview process, FAF reached a point of comfort that Atkinson supported meaningful differences.

“We expect that his commitment to differential standards has evolved and that his actions and those of his council will, in fact, fulfill the FAF’s commitment to at long last address this issue,” Melancon had said.

Melancon said many of the appointed members of the PCC have supported the need for differential standards. Joining Atkinson on the PCC are:

• George Beckwith, vice president and CFO of National Gypsum Co. in Charlotte, N.C.
• Steven Brown, vice president of US Bank in Portland, Ore.
• Jeffery Bryan, partner, professional standards group of Dixon Hughes Goodman LLP in High Point, N.C.
• Mark Ellis, CFO of PetCareRx Inc. in Chappaqua, N.Y.
• Thomas Groskopf, director and owner of Barnes, Dennig & Co. Ltd. In Cincinnati.
• Neville Grusd, president of Merchant Financial Corp. in New York City.
• Carleton Olmanson, managing principal of GMB Mezzanine Capital in Minneapolis.
• Diane Rubin, partner of Novogradac & Co. LLP in San Francisco.
• Lawrence Weinstock, vice president for finance of Mana Products Inc., in Long Island City, N.Y.

The PCC will meet at least five times a year and will identify, deliberate, and vote on proposed exceptions and modifications to existing U.S. GAAP for private companies. In addition, the PCC will be FASB’s primary adviser on private company issues during the development of new standards.

Exceptions and modifications proposed by the PCC will be subject to ratification by a simple majority of FASB members. FASB member Daryl Buck will serve as FASB’s liaison to the PCC.

If FASB fails to endorse PCC recommendations, the board must provide written notice and recommend changes that could lead to endorsement.