By Allison M. Henry, CPA, CGMA, PICPA Vice President - Professional & Technical Standards
On May 23, 2012, the Financial Accounting Foundation (FAF) board of trustees finalized the structure of a new body, the Private Company Council, which will work to address the needs of privately held entities through changes to U.S. Generally Accepted Accounting Principles (GAAP). This is the culmination of years of lobbying for changes to GAAP to meet the unique financial reporting needs of privately held entities. Did privately held entities get what they were looking for?
According to the FAF press release
dated May 23, 2012, the new council will both identify situations where exceptions or modifications to GAAP are needed for private companies and serve as an advocate for privately held entities in connection with the FASB’s ongoing standards setting activities. The FAF stopped short of providing the council with the authority to make any adjustments to GAAP. Exceptions and modifications proposed by the council will go to the FASB for endorsement. In effect, the FAF stopped short of meaningful change.
Interestingly, the AICPA, also on May 23, 2012, issued a statement commending the FAF for making important changes to the original FAF proposal and confirming AICPA’s continued support for the FAF’s process. At the same time, the AICPA “announced plans to develop an ‘other comprehensive basis of accounting’ financial reporting framework to meet the needs of both privately held small- and medium-sized enterprises and the users of their financial statements.”
It remains to be seen whether the FASB will continue to serve as the standard setter for private companies, or whether the new reporting framework from the AICPA will fill the void. At the end of the day, chalk one up for the status quo.