U.S. Private Companies Get Separate Accounting Board –WSJ

New private company council includes FASB, but in reduced role, The Journal of Accountancy explains.  “This announcement is excellent news for small businesses that have been concerned about the future of US GAAP particularly in relation to an international move toward IFRS,” adds Editor Gail Perry at AccountingWeb.  Emily Chasan at the Wall Street Journal reports:

The Financial Accounting Foundation’s Board of Trustees voted Wednesday to establish a new Private Company Council that will create exceptions and modifications to U.S. accounting rules as they apply to private companies.

 

The board, which oversees the U.S. Financial Accounting Standards Board, said the new 9 to 12 member board will determine whether private companies require changes to U.S. Generally Accepted Accounting Principles and will serve as the primary advisory body to the FASB on whether private companies are receiving appropriate treatment in new accounting rules under consideration by the FASB.

The Financial Accounting Foundation’s Board of Trustees voted Wednesday to establish a new Private Company Council that will create exceptions and modifications to U.S. accounting rules as they apply to private companies.

The board, which oversees the U.S. Financial Accounting Standards Board, said the new 9 to 12 member board will determine whether private companies require changes to U.S. Generally Accepted Accounting Principles and will serve as the primary advisory body to the FASB on whether private companies are receiving appropriate treatment in new accounting rules under consideration by the FASB.

The formal vote creating the council comes after years of pressure on the foundation from private companies, who complained accounting rules were too complex and costly to truly benefit private company stakeholders. Private companies are typically required to produce U.S. GAAP financial statements for their lenders. But the companies have pushed back against standard setters, particularly on rules that require more use of fair value accounting, which they say their lenders don’t need. A blue ribbon panel recommended in January 2011 that the FAF create a separate board to create rules for private companies, but some had worried that the creation of a “little GAAP” would water down accounting rules.

Teresa Polley, president of the FAF, said that the plan to create the council was intended to balance concerns from companies and other stakeholders, after the board first proposed creating the council in October.

“On one hand, the plan recognizes that the needs of public and private company financial statement users, preparers, and auditors are not always aligned,” Polley said in a statement. “But at the same time, the plan ensures comparability of financial reporting among disparate companies by putting in place a system for recognizing differences that will avoid creation of a two-GAAP system.”

The FAF said it changed the process FASB will use to consider recommendations from the Council. Under the new process, if the Private Company Council’s proposal for a modification of GAAP is endorsed by a simple majority of FASB members, the proposed exception or modification will go out for public comment. The FAF also proposed more frequent meetings of the Private Company Council than originally suggested, and dropped a requirement that the council chair be a member of the FASB.

The foundation said it plans to put out a call for nominations to the Private Company Council in the next few weeks and conduct an overall assessment of the new council’s functioning following its first three years of operations.

Read the whole piece here. 

Things Kick into High Gear

See also:

Private Company Council: Progress at Glacial Speed  —CPA Success [Maryland Association of CPAs]—5/24/2012

New Private Company Standards Council Established   —Accounting Today

U.S. Private Companies to Get Separate Accounting Board —The Economic Times

AICPA Says it Supports FAF’s New Private Company Council   —WebCPA

Council Formed to Address Private Company Concerns  —ComplianceWeek