NEWS RELEASE 10/04/11
Financial Accounting Foundation Seeks Comments on Plan to Improve Standard Setting for Private CompaniesNorwalk, CT, October 4, 2011—A new council with the authority to identify, propose and vote on specific improvements to US accounting standards for private companies is the centerpiece of a new private company plan released today for public comment by the Board of Trustees of the Financial Accounting Foundation (FAF).
The FAF is the independent, private-sector organization responsible for the oversight and administration of the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). The FASB and GASB set US accounting standards for public and private companies, not-for-profit organizations and state and local governments.
The Board of Trustees is seeking public comment on the plan through January 14, 2012.
The Trustees also plan to conduct roundtables across the country in early 2012. The Trustees will make a final decision after reviewing and considering public input.
Under the FAF plan, a new Private Company Standards Improvement Council (PCSIC) would identify, propose, deliberate and formally vote on specific exceptions or modifications to US Generally Accepted Accounting Principles (US GAAP) for private companies. Changes approved by a two-thirds majority would be forwarded to the FASB for ratification. The changes would become final following public comment, further deliberation by the PCSIC and final ratification by the FASB. The PCSIC would replace the Private Company Financial Reporting Committee (PCFRC), a FASB advisory-only body established in 2006.
“Establishing this new council with the power to deliberate and vote on accounting changes—subject to FASB ratification—is the best way to significantly strengthen the standard-setting process for private companies,” said John J. Brennan, chairman of the FAF Board of Trustees. “This approach reflects not only the judgment of the Trustees, but the views of a broad cross-section of constituents from whom we heard during our extensive outreach effort,” Brennan added.
The new private company council would comprise between 11 and 15 members, appointed by the FAF Trustees, representing investors, lenders, auditors, accountants and others with broad experience in using and preparing private company financial statements. The chairman of the group would be a member of the FASB and also would be appointed by the FAF Trustees.
“Many concerns and challenges identified by private companies are shared by public companies,” said FAF President and Chief Executive Officer Teresa S. Polley. “The approach outlined by the Trustees would ensure that all constituents would have the potential to benefit from improvements that reduce the complexity of accounting standards—public as well as private investors, lenders and others.”
Once its members were appointed, the PCSIC, jointly with the FASB, would develop a set of specific criteria to determine whether and when exceptions or modifications to US GAAP are warranted for private companies. Based on those criteria, the PCSIC would identify aspects of existing US GAAP that its members believe require exceptions or modifications and then vote on specific changes.
Changes approved by a two-thirds vote would be subject to ratification by the FASB and thorough due process, including public comment. Following the public comment period, the PCSIC would redeliberate the proposed exceptions or modifications at a meeting attended by the FASB members and vote on final changes. Following the vote, the final changes would be forwarded to the FASB for final ratification.
“The Trustees believe that this approach is the most balanced way to address the concerns of private company constituents,” Brennan said. “We look forward to reviewing public comments on this proposal before making a final decision.”
The complete plan is available on the FAF website.
Request for Comments
The FAF Board of Trustees invites individuals and organizations to send written comments on the “Plan to Establish the Private Company Standards Improvement Council.”
The Trustees request that responses from those wishing to comment on the plan be received in writing by January 14, 2012. Interested parties should submit their comments by email to PrivateCompanyPlan@f-a-f.org. Those without email should send their comments to “Private Company Plan—FAF," 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. Please do not send responses by fax.
All comments received constitute part of the FAF’s public file. The FAF will make all comments publicly available by posting them to the FAF website.
Public Roundtable Meetings
The FAF Board of Trustees plans to hold public roundtable meetings after the end of the comment period to hear the views of, and obtain information from, interested parties regarding the “Plan to Establish the Private Company Standards Improvement Council.” The Trustees plan to seek participants for the meetings that represent a wide variety of constituents (including users, preparers, auditors and others) to ensure that they receive broad input. The schedule, location and other details of the process for participating in these roundtables will be announced in the coming weeks by the Trustees on the FAF website (www.accountingfoundation.org).
About the Financial Accounting Foundation
The Financial Accounting Foundation is the independent, private-sector organization responsible for the oversight, administration and finances of the FASB and the GASB. The FAF is also responsible for selecting the members of the FASB and GASB and protecting the independence and integrity of the standard-setting process.
Robert W. Stewart
Financial Accounting Foundation
Financial Accounting Foundation