This month’s second free CPA Exam video lecture is a must-have for anyone preparing to sit for the FAR section of the CPA Exam. It features the very latest (as of July 2015) information and key functions of the Private Company Council.
What Does The Private Company Council Do ?
The Private Company Council (often referred to as the PCC) has two primary responsibilities:
- Working jointly with the Financial Accounting Standards Board (FASB), it helps to develop an agreed-upon criteria to decide whether and when alternatives within U.S. Generally Accepted Accounting Principles (GAAP) are warranted for private companies. It then reviews and proposes alternatives within GAAP for use on private company financial statements.
- It serves as the primary advisory body to the FASB on the appropriate treatment for private companies for items under active consideration by FASB.
In this short video lecture, Professor Pam Smith of Northern Illinois University offers an overview of what the PPC is and does and also provides some great examples of the accounting standards it handles.
Sample Questions About The Private Company Council
To help you process what you just learned from Prof. Smith, here are a few Wiley CPAexcel practice questions about the Private Company Council. These are the kinds of questions you can expect to see during the FAR section of the CPA Exam (though not in this exact wording!). Test your knowledge and then check your answers by scrolling to the bottom of this blog post. Good luck!
1) Which of the following is the tradeoff for setting GAAP by the Private Company Council?
A. Relevance versus cost-benefit.
B. Reliability versus cost-benefit.
C. Relevance versus materiality.
D. Reliability versus materiality.
2) The Private Company Council has issued modified accounting for private companies for what aspect of Goodwill?
A. Goodwill impairment testing.
B. Goodwill amortization.
C. Goodwill measurement.
D. Goodwill reporting.
3) Which of the following does not have an alternative accounting for private companies?
A. Interest rate swaps—variable rates to fixed rates.
B. VIE criteria to common controlled leasing arrangements.
C. Accounting for certain intangibles in business combination.
D. Recognition of contingent consideration in a business combination.
The PCC sets standards for private companies by weighing the relevance of the information versus the cost benefit.
The PCC allows private companies to amortize goodwill over a period to not exceed 10 years.
There is no simplified accounting for the contingent consideration in a business combination.