Project Update

Private Company Decision-Making Framework

Last updated on April 23, 2013. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

*Project Objective
*Outreach
*Due Process
*Decisions Reached at Last Meeting
*Next Steps
*Board/Other Public Meeting Dates
Background Information
*Contact Information

*Project Objective

The objective of this project is to develop a private company decision-making framework (the guide) for the Board and the PCC to use in determining whether and in what circumstances to provide alternative recognition, measurement, disclosure, display, effective date, or transition guidance for private companies reporting under U.S. GAAP. This guide is not intended to be an entirely new conceptual framework that would lead to a basis for preparing financial statements of private companies that is fundamentally different from the basis for preparing financial statements of public companies. Rather, this guide would augment the existing conceptual framework for financial reporting to provide additional considerations in making user-relevance and cost-benefit evaluations under the existing conceptual framework for private companies.

*Outreach

In July of 2011, FASB staff completed an initial assessment about how and why the needs of users of private company financial statements differ from those who use public company financial statements, and how the cost-benefit considerations of financial reporting vary between private and public companies. This assessment is a very important input in developing a guide for evaluating when and how to modify U.S. GAAP for private companies. The assessment summarizes what the FASB staff has learned from input from a variety of private company stakeholders over the past few years and its research and papers published on the topic of private company financial reporting.

The staff’s sources include input from FASB advisory groups, including the Private Company Financial Reporting Committee and the Small Business Advisory Committee, comments from those who participated in the FASB’s general and project-specific roundtables held specifically for nonpublic entity stakeholders, comment letter responses, targeted discussions with various individuals and organizations, and comments by members of the Blue-Ribbon Panel on Standard Setting for Private Companies. The staff also took into consideration a number of reports and publications prepared by accounting firms and organizations such as the American Institute of Certified Public Accountants and Financial Executives International.

In addition, the FASB formed a new 10-member Private Company Resource Group to review the accuracy and completeness of the staff’s assessment and to advise the staff in developing a decision-making framework. This Private Company Resource Group includes users, preparers, and auditors of private company financial statements, along with an academic representative and the chairman of the Private Company Financial Reporting Committee.

On July 31, 2012, after consultation with the Board, the FASB staff issued a Discussion Paper, Private Company Decision-Making Framework: A Framework for Evaluating Financial Accounting and Reporting Guidance for Private Companies, to gather input from interested stakeholders on a framework for deciding whether and when to modify U.S. generally accepted accounting principles (GAAP) for private companies.

On April 15, 2013, the Board and the Private Company Council issued an Invitation to Comment, Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies. This Invitation to Comment represents the views of the Board and the PCC after considering respondents’ comments to the initial Discussion Paper issued on July 31, 2012 as well as the views received through other outreach initiatives.

*Due Process Documents

On April 15, 2013, the Board and the Private Company Council issued an Invitation to Comment, Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies, with a comment period that will end on June 21, 2013.
On July 31, 2012, after consultation with the Board, the FASB staff issued a Discussion Paper, Private Company Decision-Making Framework: A Framework for Evaluating Financial Accounting and Reporting Guidance for Private Companies, the comment period ended on November 9, 2012.

*Decisions Reached at Last Meeting

The Board decided that the comment period for the Private Company Decision Making Framework should end on June 21, 2013. This comment period end date will give the staff time to provide the FASB and Private Company Council members a summary of comment letters before the July 16, 2013 Council meeting. At that meeting, the Board and PCC are expected to consider the need for changes to the Framework in light of the feedback received.

*Next Steps

On April 15, 2013, the Board and the PCC issued an Invitation to Comment, Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies, with a comment period that will end on June 21, 2013.

Following the conclusion of the comment period, the Board and the PCC are expected to consider the need for changes to the Framework in light of the feedback received at the July 16, 2013 PCC meeting.

*Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Boards' deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

April 10, 2013 Board Meeting—The Board decided that the comment period for the Private Company Decision-Making Framework should end on June 21, 2013.
February 12, 2013 PCC Meeting—The Board and the PCC made decisions related to the Private Company Decision-Making Framework.
July 20, 2012 Education Session—The staff discussed with the Board their remaining questions before the release of the Invitation to Comment on the decision-making framework for private companies. No decisions are made at education sessions.
May 14, 2012 Education Session—Discussion about the staff’s progress toward developing a decision-making framework for private companies. Refer to linked presentation used to facilitate the update provided by the staff. No decisions are made at education sessions.

Background Information

Creation of a decision-making framework about standard-setting for private companies was one of the important recommendations included in a report by the Blue-Ribbon Panel on Standard Setting for Private Companies released in January 2011 to the Board of Trustees of the Financial Accounting Foundation (FAF), which is the FASB’s oversight organization. The Blue-Ribbon Panel’s report also included a short-term recommendation that the FASB begin work on the framework while the FAF Trustees consider the other recommendations in its report.

Completion of the proposed private company decision-making framework underscores the FASB and the PCC’s ongoing commitment to better serve the needs of all private company stakeholders, including users and preparers of private company financial statements, without sacrificing the quality and fundamental level of comparability of U.S. GAAP financial statement reporting.

*Contact Information

Michael Cheng
Project Manager
mkcheng@fasb.org

Jeffrey D. Mechanick
Assistant Director
jdmechanick@fasb.org

Kailee Boyce
Postgraduate Technical Assistant
kboyce@fasb.org

Callie Haley
Postgraduate Technical Assistant
cmhaley@fasb.org


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