By Jason Bramwell
That day will mark the end of a public comment period on a proposed private company decision-making framework that the FASB and the PCC are developing. The framework is intended to act as a guide for both organizations in determining whether and in what circumstances to provide alternative recognition, measurement, disclosure, display effective date, or transition guidance for private companies reporting under US generally accepted accounting principles (GAAP).
"The guide will help the FASB and the PCC identify the unique needs of users of private company financial statements," John Pappas, senior manager of media relations and constituent communications for the FASB
, told AccountingWEB. "It will also help us identify opportunities to reduce the cost and complexity of preparing private company financial statements, in accordance with GAAP."
The FASB hopes that the feedback from private company stakeholders, including preparers of private company financial statements and large and small accounting firms, will be beneficial to the initiative.
"We hope that accounting firms will convey to their private company clients that this is an effort to make things more user-friendly while still giving lenders and investors the information they need about private companies," Christine Klimek, senior manager of media relations and executive communications for the FASB, told AccountingWEB. "The end goal is always to improve financial reporting and to provide information that is relevant to the users of private company financial statements."
Initial Invitation to Comment
- What should the framework look like?
- What factors should differentiate a private company from a public company?
- What other criteria should be included in the framework?
"The idea is not to create two sets of GAAP. The intent is to consider private company constituent feedback in identifying alternatives for private companies within US GAAP," Klimek says.
According to Pappas, the FASB received fifty-seven responses – mostly from representatives of private companies, banking and financial institutions, and large and small accounting firms – during the initial invitation to comment.
In December 2012, the FASB met with the PCC for the first time to discuss the feedback that was provided during the initial comment period. The Financial Accounting Foundation (FAF) – the FASB's parent organization – created the PCC in May of that year to work with the FASB to determine whether and when to modify GAAP for private companies.
"We told the PCC, 'Here's our initial proposal for a framework, and this is what we've heard from stakeholders about how to improve the framework and what they'd like to see,'" Klimek recalls. "This framework was always intended to guide the FASB and the PCC in working together. It's important that the PCC deliberate with us so FASB doesn't finalize this thing and say, 'Ok, here's the framework we're going to use.'"
The FASB and the PCC developed the proposed provisions contained in the 2013 Invitation to Comment based on their discussions at the PCC's February 2013 meeting. As a result of those discussions, two significant changes were made to the original FASB staff proposal:
- Removing the industry-specific presumption by having the FASB and the PCC consider whether the same industry-specific guidance is relevant to users of financial statements of both public companies and private companies.
- Allowing a private company to select the alternatives within GAAP for recognition or measurement guidance that it deems appropriate, without having to apply all the alternatives within GAAP for recognition and measurement.
"Now that the deliberated proposal is out there, we're now looking for feedback [during the second comment period] from stakeholders on what they think," Klimek says. "If we receive a lot of feedback that says we need to do more research in other areas, then we may do more outreach with stakeholders. Or, if they generally like what's being proposed and there's very little to change, then we'll proceed with doing a final issuance of the framework."
Pappas and Klimek both hope the 2013 Invitation to Comment generates as much feedback as the initial public comment period last July.
"I think we expect about the same number of comments as last year, but it's hard to say in advance," Klimek says. "This is an issue that has generated a lot of interest. The FAF and the FASB have done a great deal in the past two years to address it, so we're hoping to get as much feedback as possible."
Those interested in providing comments to the FASB during the 2013 Invitation to Comment can do so here
. The deadline is June 21.