The Financial Accounting Foundation ( FAF ) . in May of 2012. has established The Private Company Council ( PCC ) to function as the primary consultative organic structure to the Financial Accounting Standards Board ( FASB ) for private company affairs. Using the U. S. Generally Accepted Accounting Principles ( U. S. GAAP ) as a usher. the PCC will urge alterations to FASB to make a “private company GAAP. ” FASB will so hold the chance to back the recommendations or require alterations. The intent of such a council is to turn to the demands of privately-held companies and not-for-profit organisations. Some have argued that the demands of public company and private company users of fiscal statements have moved farther apart over the past 10 old ages. FAF’s original proposal was to make a Private Company Standards Improvement Council ( PCSIC ) . The inside informations of this council were submitted for public remark and of the remark letters received. overall. 63 % of the respondents opposed the FAF’s program. The resistance indicated that the program did non “sufficiently address the important alterations that are necessary to better the standard-setting procedure for the private companies. ”
Of those opposed. it appears that they believe the FASB has non recognized the demands of private companies in the yesteryear. and with a FASB member as chair. the PCSIC would be controlled by FASB and would impede the PCSIC’s ability to do alterations. Some respondents noted that they were non concerned with holding two sets of U. S. GAAP’s because “Financial coverage differences already exist for private companies and public companies under U. S. GAAP and there are incremental fiscal statement coverage demands for companies registered with the SEC. ” and a “significant figure of private companies prepare fiscal statements with goings from one or more accounting criterions. which consequence in qualified audit sentiments. ” Supporters of the PCSIC did non believe two sets of criterions were good because it would “lead to two separate sets of accounting criterions and thin the quality. comparison. consistence. and repute of U. S. GAAP. ” Supporters of the program thought it “strikes the right balance of interaction between the FASB and the PCSIC and provides for equal inadvertence and monitoring by the FAF. ”
Others back uping the program thought that the “PCSIC is a important betterment over the FASB’s current processes” . The FAF took the remarks and revised their program for a PCSIC and created a more flexible PCC council. The PCC will non hold a FASB member on the board and their recommendations will non necessitate confirmation. merely indorsement from the FASB. The PCC will find its ain docket with input from the FASB and stakeholders and will work to “identify criterions that may necessitate alterations or exclusions to turn to the demands of users of private company fiscal statements. ” Alterations approved by a two-thirds ballot of PCC members will be provided to the FASB for indorsement. My return on the best attack for private company criterions would back up the creative activity of the PCC and a separate U. S. GAAP for private companies.
The FASB would so hold two criterions: U. S. GAAP ( Public ) and U. S. GAAP ( Private ) . Since the FASB has historically been public company focused and some members do non hold private company experience. I was originally tilting more sharply towards holding a separate Accounting Standards Board for private companies similar to FASB being separate from GASB. However. sing that public and private companies have more similarities. making a separate Board could take to comparison and consistence issues. I believe the FAF conducted their due diligence and created the right balance with the creative activity of the PCC. which was amended from their original PCSIC program. The creative activity of the Private Company Review Committee ensures answerability and a three-year appraisal to find effectivity of the procedure is important. It is clear from the remarks that the FASB has non addressed the concerns of private company users of fiscal statements and the PCC should assist give the private industry a voice.
