The American Institute of Certified Public Accountants (AICPA) and the Financial Accounting Foundation (FAF) have announced the establishment of a “blue-ribbon panel” to address how U.S. accounting standards can best meet the needs of users of private company financial statements.
The panel will provide recommendations on the future of standard setting for private companies, including whether separate, standalone accounting standards for private companies are needed. Members of the panel will represent a cross-section of financial reporting constituencies, including lenders, investors and owners as well as preparers, auditors, and regulators. Joining the FAF and AICPA as sponsors of the panel is the National Association of State Boards of Accountancy (NASBA).
"The time has come for a new look at the policy issues of how U.S. generally accepted accounting principles (GAAP) are established for private companies,” said AICPA CEO and President Barry Melancon. “The agreement between the AICPA and FAF to collaborate on this endeavor demonstrates our joint commitment to this issue. We are pleased that NASBA will be supporting this important effort.”
FAF President Terri Polley said: “The FAF heard from the Private Company Financial Reporting Committee and many others during its recent nationwide outreach meetings about the need to consider the issue of GAAP for private companies. We look forward to working with the AICPA and NASBA as we consider the future of standard setting for this constituency.”
David Costello, president and chief executive officer of NASBA, said, “On behalf of state boards of accountancy and the public which they represent and serve, NASBA is pleased to join the AICPA and FAF in a comprehensive review of the process for setting accounting standards for private companies.”
The chairman and members of the panel will be named in January.
There are 29 million privately held companies in the U.S. according to the U.S. Census Bureau. Many are small- and medium-sized organizations that report to a narrower range of financial statement users, such as lenders, venture capitalists, and insurers.
In October, the AICPA’s governing Council overwhelmingly supported exploring different accounting standards for private companies. The AICPA Board and the FAF Board of Trustees approved resolutions to form the panel in November.