The accounting profession will work with the Financial Accounting Standards Board (FASB) to evaluate potential changes to generally accepted accounting principles (GAAP) for privately held, for-profit companies the governing council of the American Institute of Certified Public Accountant (AICPA) announced on Monday.
The AICPA Council resolution directs AICPA management to work with the Financial Accounting Foundation (FAF) and the Financial Accounting Standards (FASB) in identifying and implementing a process for evaluating potential changes in recognition, measurement and disclosure from GAAP currently applied by public companies.
“This is a noteworthy milestone for constituents of private company financial reporting who argue their needs are significantly different from those of users of public company financial reporting,” says Robert Bunting, hair of the AICPA. “Because private companies represent an important part of the nation’s economy we must ensure that today’s and tomorrow’s accounting standards remain relevant to their constituents’ needs.”
The Governing Council vote endorses the conclusions of a report released in March by the AICPA’s Private Company Financial Reporting Task Force recommending a process be established to improve the usefulness of private company financial reporting. The conclusions of the Task Force were based on input from more than 3,700 lenders, investors, sureties, business owners, financial managers and public accounting practitioners.
“Private companies are a vital force in the nation’s economy and it is, therefore, critical that their financial reporting be conceptually sound, cost effective, and provide relevant, reliable and useful information,” states Robert Herz, Chairman of the FASB. “The FASB has taken a number of steps in recent years to increase the voice and participation of private company users, preparers and auditors in FASB activities, and to codify and simplify the GAAP literature. We are very open to exploring ways to further enhance the overall value of private company financial reporting.”