What has the PCC done for your business lately?

It’s tough being a midmarket business.
Accounting and reporting requirements can be a significant burden for companies without the vast human and financial resources of larger enterprises. One organization is hard at work to make things just a bit more manageable for these middle market companies: The Private Company Council (PCC).
Smart Business spoke with Karen Burns, assurance partner at Sensiba San Filippo LLP, about the PCC and the beneficial changes they are making that could impact your business.
What is the PCC?
Accounting standards are not intended to create difficulty for private companies. But with needs and profiles that differ from those of larger public companies, it can often feel that way to midmarket businesses as they struggle to meet onerous compliance responsibilities designed with public companies in mind.
In order to address this problem, the PCC was established in May 2012.
The PCC works with the Financial Accounting Standards Board (FASB) to determine when and whether to modify U.S. generally accepted accounting principles (GAAP) for private companies.
Based on advice from business leaders and financial professionals, the PCC proposes alternatives to particularly cumbersome GAAP standards, which become accepted practice after input from multiple stakeholders and final FASB approval.
The 10-member PCC seeks ongoing input from private company CFOs, CPAs and representatives of financial institutions across the country to gain a clear understanding of the accounting challenges these businesses face. This input can come in the form of solicitations to comment, or regional roundtables.
What changes has the PCC already made?
Since its inception, the PCC has achieved several notable changes that deliver welcomed alternatives to many private companies.
For example, last year the FASB approved a change that allows for alternative goodwill accounting. Under this option, goodwill can be amortized over 10 years — or less, if a shorter life is appropriate beginning in calendar year 2015.
This is important because the goodwill generated from private company transactions often does not extend beyond 10 years, yet companies previously had to complete a complex calculation annually to test for impairment of value.
Another significant accomplishment is an easing of the guidance regarding consolidation of variable interest entities (VIE) under common control leasing arrangements. Effective for calendar year 2015, this change allows entities to elect not to apply VIE guidance — i.e. not to consolidate — when all of the following are true:
■  Common control of the leasing entity exists.
■  Substantially all activity is limited to leasing.
■  The principal amount of obligation at inception does not exceed the value of the asset leased by the company from the lessor.
If elected, the alternative rules must apply to all leasing arrangements that meet the above conditions. Early adoption is also allowed.
What anticipated changes are in the PCC’s pipeline?
Recently, the PCC made additional recommendations to the FASB to ease the burden on midmarket business regarding:
■  Other comprehensive income.
■  Liabilities with characteristics of equity.
■  Cash flow classification.
■  Financial statement presentation.
The PCC presented these topics as immediate priorities, so it’s reasonable to hope for exposure drafts regarding alternative standards in the near future.
It’s easy for business leaders to regard those who set accounting standards as opponents because of their sometimes unnecessary complexity. While that’s understandable, the intent is for transparency to the users of the financial statements.
With the PCC’s ongoing work, aided by input from CPA firms that understand the private company sector, accounting for this market segment may continue to become increasingly user-friendly. ●
Insights Accounting is brought to you by Sensiba San Filippo LLP.