PwC generally believes the guide identifies the appropriate matters to consider when determining whether a modification to GAAP should be available to private companies.
In our comment letter on the FASB’s and the PCC’s Invitation to Comment on the proposed Private Company Decision-Making Framework, we generally believe the guide identifies the appropriate matters to consider when determining whether a modification to GAAP should be made available to private companies. The guide identifies the significant differentiating factors that could support financial reporting differences between public and private companies.
Given that the accounting that is relevant to users of public company financial statements is also generally relevant to users of private company financial statements, we believe that modifications to the recognition and measurement guidance for private companies should be rare and limited to instances where private and public company financial statement users have clearly different information needs. When determining whether this is the case, we agree that more weight should be placed on the relevance to users of financial information than the cost and complexity for preparers. Differences in disclosure requirements, transition methods and effective dates could reduce costs for private companies without compromising the relevance of the information provided to users.
We agree with the approach in the guide which would generally allow a private company to select the alternatives within recognition or measurement guidance that it deems appropriate to apply, without having to apply all alternatives.
Lastly, we agree that when the board and PCC identify cost-effective alternatives for private companies, this may benefit the board’s standard setting activities for public companies, not-for-profit entities and employee benefit plans.