A blue ribbon panel on private company financial reporting, expected to make its final recommendations before the end of the year, does not believe the current approach for setting generally accepted accounting principles (GAAP) related to private companies is meeting user needs in a cost-effective matter. Through its discussions, the panel also has rejected any near-term future model based solely on International Financial Reporting Standards (IFRS). As the panel works toward its recommendations, it seeks input from all stakeholders involved with private company financial statements.
The panel was formed earlier this year by the AICPA, the Financial Accounting Foundation (FAF) which oversees the Financial Accounting Standards Board (FASB), and the National Association of State Boards of Accountancy (NASBA) to explore the future of standard setting for private companies. Panel members now are debating various standard-setting models, as well as the structure of the board that would set those GAAP standards.
The 18-member blue ribbon panel is headed by Rick Anderson, chairman and CEO of Moss Adams LLP and a current FAF board member. The other panel members, which includes AICPA President and CEO Barry C. Melancon, CPA, represent a top level cross-section of the different financial reporting constituencies.
Differences Are a Definite
All three financial reporting models being considered by the panel would result in appropriate differences in GAAP for private companies. The panel will be deciding whether to recommend either: (1) U.S. GAAP with exclusions and enhancements for private companies, (2) a basic U.S. GAAP with public company add-ons, or (3) separate, stand-alone standards for private companies based on current U.S. GAAP.
A Separate Board?
The panel also is exploring whether to recommend a board separate from the FASB to oversee private company standards. Melancon believes that it should. “Having one board set two different standards is impractical,” he was quoted as saying at the most recent panel meeting. “The FAF should establish a separate board for private companies, composed solely of individuals focused on private companies.”
Public Input Sought
Before making its recommendations to the FAF, the blue ribbon panel is seeking public input about how accounting standards can best meet the needs of users of private company financial statements. The panel, the AICPA, FAF and NASBA are urging all constituents of private company reporting to visit www.fasb.org so they can provide any additional information or insights and suggest actions that would make private company financial statements more relevant, such as a separate standard-setting board. The public comment period ends Wednesday, September 15, 2010.
Related Resource: Video of AICPA President and CEO Barry C. Melancon, CPA, discussing the panel's progress, his support for a separate standard-setting board for private companies and the stakeholder input being sought.