By AccountingWEB Staff
The American Institute of Certified Public Accountants' (AICPA) governing council overwhelmingly approved a resolution that sends a strong message to the Financial Accounting Foundation (FAF): Either the FAF moves to adopt the Blue Ribbon Panel on Standard Setting for Private Companies' recommendations for a separate board – which is the AICPA's preference – or the AICPA will consider other options.
Those options could include creating a separate standard setting body to develop private company generally accepted accounting principles (PCGAAP) or a comprehensive private company-specific basis of accounting that would deliver meaningful, lasting improvement to private company financial reporting consistent with the panel's recommendations.
The Blue Ribbon Panel was a broad-based group representing private company constituents, including bankers, sureties, venture capitalists, CEOs, preparers, CPA practitioners, and regulators. In January 2011, the panel recommended establishing a private company standards board under the FAF to set differences in U.S. generally accepted accounting principles (U.S. GAAP).
The FAF rejected that recommendation in early October, despite over 3,000 letters from private company constituents and more than thirty state CPA societies that wrote in support of the panel's recommendation.
The FAF has proposed a new Private Company Standards Improvement Council (PCSIC) that would identify, propose, and formally vote on specific exceptions or modifications to U.S. GAAP for private companies. Changes approved by a two-thirds majority would be forwarded to the Financial Accounting Standards Board (FASB) for ratification.
In its press release, the AICPA said that the proposed council would essentially replicate what exists today in the Private Company Financial Reporting Committee (PCFRC), which likewise is subject to ratification by the FASB. The current PCFRC has been unable to overcome the FASB's reluctance to accept key modifications to U.S. GAAP. Given the FASB's historic vetoes, it is expected that identifying and executing needed differences in U.S. GAAP standards for private companies would be unlikely to occur, if at all, until 2014.
The AICPA has called on members to send comment letters to the FAF supporting an authoritative standard-setting board.