The Private Company Financial Reporting Committee has given the Financial Accounting Standards Board feedback on its financial statement presentation project, including worries about newly onerous processes.
At a meeting last week in San Antonio, Texas, the committee, which is a joint effort of FASB and the American Institute of CPAs, talked about its comment letter to FASB on the project. The letter revolved around a discussion of the pros and cons from various financial statement users and others, according to PCFRC chair Judy ODell (pictured).
It was not a united front where we were recommending anything specific on it, she told WebCPA. FASB had asked us at our meeting in January not necessarily to be unanimous, especially in the early stages, but to present comments pro and con as they continue to discuss the project.
The main area of concern was doing the direct method of cash flow. One practitioner had told the PCFRC that the direct method could be time-consuming, especially when the income statements become disaggregated, even though financial companies seem to like this method. Thats probably going to be the biggest area of disagreement between the preparers and the practitioners, said ODell. But it would be very difficult to have one model for private companies and one model for public companies.
However, she noted that some areas could be tweaked, perhaps with a different phase-in period for private companies, as was suggested by one committee member. The cost to implement a new type of financial statement presentation could be high, though, for both private and public companies, as well as for users of the financial statements.
The PCFRC meeting also included a discussion of FIN 48, or FASB Interpretation No. 48, which covers accounting for uncertainty in income taxes. The standard has been repeatedly delayed for private companies, which worry about the costs and legal liabilities associated with it. The committee talked about the feedback it would give FASB on a draft document containing guidance that will be provided to pass-through entities such as partnerships and S corporations.
Most of our comments revolved around further clarifying what is already out there, said ODell. There will be an exemption from the roadmap for private companies for disclosure, what are called roadmap disclosures. Private companies wont have to comply with that part of FIN 48 as it is proposed.
She said the guidance would clarify who is responsible for paying the tax, provide a definition of uncertainties for nonprofits and explain how to deal with a situation in which one of a company's entities may be a pass-through and one may not. ODell expects the exposure draft of that FASB staff position to be released sometime in May. There will be a comment period before the guidance is finalized.
The PCFRC also debated a discussion paper about revenue recognition at its meeting and will work on finalizing its comments at its next meeting in June. In addition, the committee had another long talk about a discussion paper on accounting for leases and how it might affect private companies. Those comments too are expected to be finalized at the PCFRCs June meeting.
