1) Private Company Accounting Update June 26, 20115 George Beckwith, Private Company Council Member Chief Financial Officer, National Gypsum Company The views expressed in this presentation are those of the presenters. Official positions of the FASB are reached only after extensive due process & deliberations Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 

2) Disclaimer   Caveat on Content §ï‚§â€¯ When I state opinions, they are my own §ï‚§â€¯ I have tried to update these slides based on our last meeting but some items are somewhat fluid §ï‚§â€¯ Everything else is also an example (especially financial statement presentation and my views on OCI) §ï‚§â€¯ I will surely say things others don’t agree with Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 2 

3) A  Few  Words  of  Thanks   §ï‚§â€¯ NASBA for Leadership §ï‚§â€¯ FAF and Mack Lawhon for courage and support §ï‚§â€¯ Other PCC members including Billy Atkinson and Diane Rubin §ï‚§â€¯ FASB members §ï‚§â€¯ NASBA Leadership attending PCC meetings – Carlos and Walter. Visible support of the process makes a difference. Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 3 

4) The  PCC  and  Me   Who We Are – Who I Am §ï‚§â€¯ 9 members and a Chair -  Users, Preparers and Practitioners -  Most of us have multiple perspectives §ï‚§â€¯ Charleston SC, public accounting to Charlotte NC §ï‚§â€¯ CFO of a large privately held company -  Building products industry -  Have lots of customers and vendors -  Cash is more relevant than reported earnings §ï‚§â€¯ Also a beekeeper (if Billy can tell stories, so can I) Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 4 

5) FAF  Governance  of  the  PCC   PCC is still new §ï‚§â€¯ While we have been around 3 years, we are still toddlers §ï‚§â€¯ Year 1 - establishing relationships as much as initial projects (low hanging fruit) §ï‚§â€¯ Year 2 – dealing with harder issues, beginning to gel as a group and with others (staff, FASB) §ï‚§â€¯ Year 3 starts the review process §ï‚§â€¯ Not time to claim we are mature enough for less FAF oversight to ensure FAF focus Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 5 

6) Outreach  is  important   §ï‚§â€¯ Town Halls (Seattle, Ohio State, SMU) §ï‚§â€¯ NAATS (next month) §ï‚§â€¯ TIC outreach §ï‚§â€¯ Speeches (Billy talks at least once or twice a month) -  Others each give talks regularly §ï‚§â€¯ Must hear ‘from the horses mouth’ what they would do if they were in charge of GAAP §ï‚§â€¯ More outreach is better, we have had too little from private companies in the past Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 6 

7) PCC  structure   §ï‚§â€¯ Number of people seems fine §ï‚§â€¯ Number of meetings seems OK §ï‚§â€¯ Time required can be significant -  Outreach -  Thought processing -  Socialization of thoughts and issues §ï‚§â€¯ The Chair should be a compensated position -  Spends more time for the cause than most FAF Board members Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 7 

8) What  the  PCC  Has  Accomplished   ASUs to help private companies §ï‚§â€¯ 4 ASUs -  Goodwill amortization – 10 years or less -  Customer Lists (goodwill in an acquisition) -  Simplified hedging for floating to fixed interest rate hedges -  VIEs treatment of lessors under common control (the implied guarantee test) Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 8 

9) What  the  PCC  Has  Accomplished   Additional Activities §ï‚§â€¯ Unconditional One Time Option without assessing ‘Preferability’ – very important and underway §ï‚§â€¯ Private Company Decision Making Framework to frame discussions around when alternatives may need to be considered §ï‚§â€¯ Definition of a private business entity §ï‚§â€¯ Development Stage Enterprise disclosures §ï‚§â€¯ Going Concern disclosures §ï‚§â€¯ Advising on current agenda topics (leases, etc.) Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 9 

10) Major  projects  underway   Major current projects §ï‚§â€¯ Share based compensation §ï‚§â€¯ Current Debt classification §ï‚§â€¯ Simplification issues -  Make GAAP more relevant to Main Street §ï‚§â€¯ To Do – sort out when agenda items affect public companies -  Those topics are still of importance to private companies Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 10 

11) FASB  and  Agenda  Setting   Owning the agenda controls the results achievable §ï‚§â€¯ Russ Golden gets it §ï‚§â€¯ The PCC needs to be able to decide what projects are most relevant – set its own agenda §ï‚§â€¯ Without agenda setting ability, difficult projects may not get the resources needed to address them (they are difficult for a reason) §ï‚§â€¯ We have to work together and coordinate agendas Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 11 

12) Advisory  vs.  Standard  Setting   Carrot and Stick §ï‚§â€¯ I was on the PCFRC as well §ï‚§â€¯ We could not effectively influence change but had a better relationship with the FASB at the end §ï‚§â€¯ PCC has the structure to require that change be addressed -  Should not be confrontational -  Advisory only would be a mistake Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 12 

13) 3  Year  Review  –  NASBA  comments   §ï‚§â€¯ Thank you for you comment letter - I agree with you §ï‚§â€¯ My opinion is we would not have accomplished what we did if those changes were in place from the beginning §ï‚§â€¯ It is getting more difficult, not easier to make changes §ï‚§â€¯ The support of FAF and NASBA is important §ï‚§â€¯ An example of what we can accomplish - Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 13 

14) My  Personal  Crusade   OCI §ï‚§â€¯ OCI is ridiculous §ï‚§â€¯ Changes to Cash Flow Statement -  Merge financing and Investing -  Add non-operating external cash sources and uses §ï‚§â€¯ Align the Income Statement with Cash Flow Statement -  Earnings from current operations -  Earnings from long term operating decisions -  Earnings related to external factors §ï‚§â€¯ Impact – EBITDA , segregation of fair value, no derivative documentation, relevant and decision useful Copyright 2014 by Financial Accounting Foundation, Norwalk, CT. For non-commercial, educational /academic purposes only. 14