Continued demand for private company accounting and reporting

By Laura Hay, CPA, CAE, President & CEO, The Ohio Society of CPAs

Following a review of the effectiveness of the Private Company Council (PCC), the Financial Accounting Foundation (FAF) issued a report in December 2024 confirming that the PCC should continue to operate, and that its current mission, remit and structure remain valid and appropriate.

Following that milestone, in March 2025, the PCC released its first annual report, highlighting its activities, accomplishments, and continued commitment to improving the relevance and usability of U.S. GAAP for private companies.

Established in 2012, the PCC is an independent body operating under the FAF to advise the Financial Accounting Standards Board (FASB) on:

• the appropriate treatment for private companies for items under active consideration on the FASB’s technical agenda, and

• possible alternatives within GAAP to address the needs of users of private company financial statements.

While the PCC does not independently issue standards, it can set its own technical agenda. Determinations about whether private company differences within GAAP are appropriate are guided by the Private Company DecisionMaking Framework, a roadmap developed jointly by the PCC and FASB.

Commenting on the FAF review of the PCC, OSCPA observed:

“Providing alternatives within GAAP for private entities that retain the decision-usefulness of financial statements while not imposing an undue economic burden remains an important priority for U.S. standards setting. Reducing low benefit/cost impediments to the use of GAAP is in the public interest, enhancing comparability, consistency and quality of U.S. financial reporting.”

OSCPA also recommended increasing representation on the PCC from smaller private entities and CPA firms who audit them, and called for earlier engagement with those groups in the standard-setting process through research and outreach.

Private Company Council 2024 Annual Report

Early exceptions within GAAP adopted as a result of PCC initiatives were widely acclaimed and impactful, including in goodwill, intangibles and variable-interest entities. In recent years, however, the PCC has received criticism for focusing on more narrow issues such as stock compensation, while significant private company pain points—such as lease accounting and revenue recognition—remained largely unaddressed.

In its 2024 annual report, the PCC reminds constituents that their concerns were heard in town halls and liaison meetings, resulting in the following key areas of progress for the year:

Credit losses – short-term trade accounts receivable and contract assets – Issued proposed changes to simplify credit losses guidance for trade receivables.

Debt modifications and extinguishments - Researched the costs and complexities of applying the debt modifications and extinguishments guidance.

Presentation of contract assets and contract liabilities for construction contractors – Evaluated ways to provide private company financial statement users with information that is more decision useful for their needs.

Lease accounting simplifications – Established a work group to explore additional private company simplifications.

Additionally, the PCC advised the FASB on its decision to exclude private companies from the scope of ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures.

In direct response to critiques related to leases and revenue recognition, the report notes that the PCC influenced a number of private company practical expedients and disclosure differences, such as:

Leases—Common Control Arrangements – Provided a practical expedient for private companies and certain notfor-profit entities to use the written terms and conditions of a common control arrangement to determine whether a lease exists and, if so, the classification and accounting for that lease.

Leases—Discount Rate for Lessees That Are Not Public Business Entities – Allows lessees that are not public business entities to make a risk-free rate election by underlying class of asset.

Revenue Recognition – Provided certain disclosure exemptions for nonpublic business entities.

The PCC’s annual report also provides insights into how agenda items will be evaluated in the future, including:

Is the issue pervasive and does it apply to all entities or only private companies?

Do technically feasible solutions exist or could they be developed?

• Is there an identifiable scope?

• Does the FASB already have a related research or technical agenda project?

• Is the issue and potential solution supported by the Private Company Decision-Making Framework?

• To what degree has the issue been raised, by whom, and with what frequency?

• What is the likely timeline to resolve the issue?

• What is the relative priority of the issue (near-term vs. longer-term)?

The report notes that several debt issues are currently under consideration, including troubled debt restructurings, debt modifications and extinguishments, debt disclosures, subjective acceleration clauses, and the effective interest rate method.

As reaffirmed by the FAF’s 2024 review, the PCC continues to serve a vital role in ensuring U.S. GAAP remains practical and relevant for private companies. Its first annual report underscores a renewed focus on meaningful simplification and stakeholder responsiveness. Given the persistent pressure of regulatory demands, the PCC’s evolving agenda and its commitment to continual engagement position it as a needed mechanism within the U.S. standard-setting landscape.

OSCPA President & CEO Laura Hay, CPA, CAE, is the staff liaison to the Accounting, Auditing, Professional Ethics Committee and the Peer Review Ethics Committee. She can be reached at Lhay@ohiocpa.com or 614.321.2241