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Private company insights: a summary of accounting and reporting reminders for private companies
Private company insights is updated annually to help private company finance leaders prepare for financial year closure. In this year's installment, we focus on essential resources to help you navigate the accounting and reporting implications arising from the current macroeconomic and geopolitical landscape. Additionally, we shed light on recent SEC updates, private company-specific standard setting changes, and developments in US GAAP that may affect non-public business entities. For standards that took effect in 2023, we offer a concise summary of the most pertinent, providing valuable insights into what their adoption might signify for your company.
Trends for private companies to consider before closing the books
- Growing optimism, focusing on transformation. According to the August 2023 edition of the PwC Pulse Survey, 72% of sector leaders view the uncertain macroeconomic environment as a risk. However, private company leaders remain optimistic, and are prioritizing technology and people for transformation. The varying strategic priorities highlight the importance of careful execution, as successful transformation can enhance resilience, while improper implementation can worsen outcomes.
- Increased adaptability. Executives are gaining confidence in their businesses' adaptability amidst unpredictable challenges, such as supply chain issues, high inflation, rising interest rates, market volatility, and geopolitical tensions. They recognize that the severity and duration of these trends may significantly impact assets and liabilities, leading to accounting and regulatory complexities.
- Pillar Two evaluation. Pillar Two applies to multinational enterprises and private equity groups, regardless of their incorporation status. It requires evaluation for "Excluded Entity" qualification based on OECD definition. This evaluation has key consequences including heightened cash tax expense, increased data demands affecting various stakeholders, potential impacts on existing tax and business structures, and amplified administrative burden and compliance costs for granular Pillar Two information tracking.
- New accounting standards. Private companies should be aware of new accounting standards, such as the Current Expected Credit Losses (CECL) model for estimating credit losses on financial assets and the simplified goodwill impairment model. Additionally, they should pay attention to the accounting standards that they may be inclined to early adopt in 2023, as well as stay updated on the status of FASB projects that could potentially impact private companies in the coming months.
We hope this publication serves as a helpful resource as you wrap up the financial reporting season and look ahead to 2024.
Build trust in a changing world
Building trust with stakeholders is crucial in an ever-changing business landscape. A quality external audit is an important aspect of building this trust, and so is staying at the forefront of emerging issues—in accounting, financial reporting, sustainability reporting, and regulatory trends. The PwC audit for private companies is the right blend of technology, people and insights, all tailored for private companies.
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