Historic moment for private company accounting standards; CPAs told they must support proposed changes

The final report of the Blue Ribbon Panel to the Financial Accounting Foundation (FAF) recommended a new, separate standard-setting board for private companies and modifications to U.S. GAAP for private companies. FAF, the oversight body for the Financial Accounting Standards Board (FASB), discussed the report at their February 15th meeting and is expected to release a proposal for public comment this spring.
 
“This was an overwhelming recommendation from the diverse panel members to establish a separate private company board with urgency,” American Institute of Certified Public Accountants (AICPA) President and CEO Barry Melancon said. “This issue has been discussed for 30-plus years and the time for FAF to act is now."
 
In a video message on the AICPA’s comprehensive Web site, Private Company Financial Reporting, Melancon strongly urges CPAs, small businesses, lenders, and other users of financial statements to become engaged and show active support by writing a high volume of comment letters to FAF’s proposal.
 
“Private company constituents must take the time to learn about the proposal, and show their support,” Melancon said. “This is an historic opportunity to make a significant departure from the past, to determine the future of financial reporting for the 29 million private companies in the U.S. . . . We must take this to fruition now. We may never again have the opportunity.”
 
Unlike other committees that have for decades looked at the problems of private companies from the perspective of individual standards, the Blue Ribbon Panel, formed by FAF, the AICPA and National Association of State Boards of Accountancy (NASBA) in 2009, was asked to look at the process of standard setting from a policy standpoint. The panel considered the relevance of current standards to private companies and the unique needs of users of private company financial statements, who are principally lenders and sureties, Melancon said.
 
Melancon envisions the new board operating something like an ON-OFF switch for existing U.S. GAAP as they apply to private companies. When the Board decides a standard is relevant to private companies, it activates an ON switch. When the Board decides a standard should be modified for private companies it pushes the OFF switch until modifications are made.
 
Paul V. Stahlin, chairman of the board of the AICPA and the regional president of Skylands Community Bank, urged AICPA members in a video message to, “Let FAF know that you support private company accounting standards. That kind of input is critical to effectuate change.”
 
Others, including CPAs serving private companies and participants in the Blue Ribbon Panel, also discuss some of the problems faced by clients and their auditors with current accounting standards. Some say their relationship to their clients has been adversely affected by the unnecessary complexity of some current standards. Clients are unhappy with the time and work involved in preparing financial statements that in the end they don’t understand.
 
Blue Ribbon Panel members, including Judy O’Dell, chairman of the Private Company Financial Reporting Committee, and Daryl Buck, who was recently named to the FASB Board, reviewed the panel’s discussions and reiterated the need for comments.
 
Remarks by Billy Atkinson, past chairman of the NASBA, a dissenting Blue Ribbon Panel member, were included in FAF’s February meeting press release. Atkinson stated that the problems of complexity and relevance of today’s accounting standards were not unique to private companies and that “the best approach for needed change is through the existing FAF-governed FASB, which should be more strategically aligned to continuously address these concerns. In our view, a separate accounting standard-setting body for private companies would lead to differential standards and result in other unintended consequences. We urge the FAF to carefully consider the potential effect on the financial reporting system.”
 
Related items:
 

You may like these other stories...

IRS must take oath on Lerner emails: judgeMackenzie Weinger of Politico reported on Thursday that a federal judge ordered the IRS to explain under oath how it lost emails connected to Lois Lerner, the ex-IRS official at the...
Credit Suisse says pension assets at risk unless court delays sentencingJohn Letzing of the Wall Street Journal reported on Wednesday that Credit Suisse Group AG says its management of billions of dollars in assets for...
The prospect of International Financial Reporting Standards (IFRS) being fully adopted in the United States in the near future are growing less likely, as the Financial Accounting Standards Board (FASB) and the International...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.