In March 2025, the Private Company Council (PCC) published its first-ever annual report. Understanding the PCC’s role in accounting rulemaking and monitoring what’s on its agenda helps private business owners and managers anticipate future accounting rule changes and potentially become active in public outreach.
Demystifying the PCC
The Financial Accounting Foundation created the PCC in 2012 to advise the Financial Accounting Standards Board (FASB) on the unique needs and concerns of U.S. privately held companies. Unlike public companies, private businesses often operate under different constraints and have fewer financial reporting resources.
The PCC suggests possible modifications to make U.S. Generally Accepted Accounting Principles (GAAP) more relevant and usable for private companies. Its recommendations aim to reduce complexity and clarify guidance while maintaining transparency and integrity in financial reporting. They often result in practical expedients and exemptions for private companies under GAAP.
Recent PCC milestones
In 2024, the PCC made significant progress in refining financial reporting standards for private companies. The PCC’s “2024 Annual Report” identifies the three notable accomplishments:
- Exclusion from expense disaggregation disclosures. Based on the PCC’s recommendations, the FASB decided to exclude private companies from the scope of Accounting Standards Update No. (ASU) 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This decision allows private companies to benefit from observing public companies’ implementations. It also provides additional time for research focused on private company contexts before considering similar requirements.
- Updated guidance on profits interests awards. Based on PCC research, the FASB added a project on profits interests awards to its technical agenda. The project resulted in ASU 2024-01, Compensation — Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. It clarifies the accounting treatment for profits interests and similar awards, impacting both public and nonpublic entities.
- Proposed amendment to credit loss rules. The PCC deliberated on the challenges private companies encounter when applying the credit losses guidance to current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. Based on the PCC’s conclusions, in December 2024, the FASB issued Proposed ASU 2024-ED900, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-Profit Entities.
If approved, the proposal would simplify the credit loss guidance. Under the proposed changes, private companies and most not-for-profit entities could elect to assume that economic conditions as of the balance sheet date persist throughout the forecast period. Furthermore, entities opting for this practical expedient could consider collections after the balance sheet date when estimating expected credit losses. This enables businesses to use real-time data, reducing the documentation burden. On March 26, 2025, the FASB directed its staff to prepare a final standard for written vote.
Throughout 2024, the PCC also provided input on several FASB standard-setting projects, including:
- Accounting for government grants, debt exchanges and environmental programs,
- Accounting for and disclosure of software costs,
- Determining the acquirer in a variable-interest-entity acquisition,
- Refining the scope of the derivatives guidance,
- Increasing the flexibility of the hedge accounting guidance, and
- Defining key performance indicators relevant to private companies.
Additionally, the PCC helped ensure the FASB’s agenda will continue to address private companies’ financial reporting needs and concerns.
Looking to the future
In 2024, the PCC developed a structured approach for setting its agenda and evaluating potential changes to GAAP. Beginning in 2025, the PCC will conduct annual reviews of financial reporting issues affecting private companies. To most effectively allocate resources, each issue’s priority will be determined based on the following criteria:
- How widespread it is among private companies,
- How often stakeholders raise concerns about it,
- Whether practical solutions already exist or can be developed,
- Whether it has an identifiable scope that makes targeted improvements feasible,
- How long it will take to resolve,
- Whether the FASB already has a related research or technical agenda project, and
- Whether the potential solution is supported by the private company decision-making framework.
The private company decision-making framework provides a “roadmap” for assessing when differentiated GAAP treatment — such as practical expedients or delayed effective dates — might be warranted for private companies.
Several debt-related issues are currently on the PCC’s radar, including:
- Troubled debt restructurings,
- Debt modifications and extinguishments,
- Debt disclosures,
- Subjective acceleration clauses, and
- Use of the effective interest rate method.
These issues are particularly relevant and timely because many private companies are experiencing tighter credit and changing interest rates. Other key items of the PCC’s 2025 agenda priorities are credit losses for accounts receivable, contract assets and liabilities for construction contractors, and lease accounting rule simplification.
Stay informed
Private companies don’t have to navigate financial reporting changes alone. With an increasingly complex reporting environment, the PCC serves as a critical bridge between private companies and the standard-setting process. Staying informed — and working closely with your CPA — can help you anticipate changes and ensure your business remains agile and compliant.
© 2025