The Private Company Financial Reporting Committee (PCFRC) met on June 19, 2008 in Atlanta, Georgia. The meeting consisted primarily of two activities.
The first activity focused on recent developments in accounting standards. Among those developments, the PCFRC discussed seeking a one-year deferral of the effective date of the proposed FASB Statement, Disclosure of Certain Loss Contingencies – an amendment of FASB Statements No. 5 and 141(R), for nonpublic entities. The proposed Statement would generally be effective for annual periods ending after December 15, 2008. Accordingly, all entities with a calendar year end would be required to adopt the proposed Statement beginning with years ending December 31, 2008. The proposed Statement will significantly expand the disclosures required for contingencies and will include certain contingencies in the scope of those disclosures that were previously not included under Statement No. 5. The PCFRC believes the one-year deferral is necessary so as to raise the level of awareness of the scope and magnitude of the required disclosures by preparers, accountants, and many lawyers serving nonpublic entities. There was also a general discussion about EITF Issue No. 07-05, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”. That Issue will generally result in many private issuers of debt with warrants attached being required to report those warrants as liabilities rather than in owners’ equity. The PCFRC was not asked to take any action other than to take every opportunity to alert practitioners and preparers of the existence of the EITF Issue and its possible effect.
In anticipation of the eventual likelihood of the United States adopting international financial reporting standards (IFRS), for its second activity the PCFRC held an educational session on the similarities and differences between U.S. generally accepted accounting standards and IFRS. The PCFRC will continue to monitor developments in this area and based on those developments assess what further efforts should be taken for and on behalf of nonpublic entities.
The next meeting of the PCFRC is scheduled to be held in Boston, Massachusetts on September 18
and 19, 2008.
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