Historic AICPA/FASB Joint Proposal Aims to Improve Private Company Financial Reporting
The Financial Accounting Standards Board (FASB) joins the American Institute of Certified Public Accountants (AICPA) today in announcing a joint proposal exploring the development of accounting standards for privately held companies. The intent of the proposal is to improve the financial reporting process for private company constituents.
“Private companies are a vital force in our economy,” Robert H. Herz, FASB Chairman said in the joint statement. “Today’s joint proposal represents just the latest step in our effort to explore ways to engage the participation of, and further improve the standard setting process for, our private company constituents.”
The proposal may be downloaded and comments submitted online at: www.privatecompanyfinancialreporting.org. The comment period ends August 15, 2006.
Specifically, the joint initiative seeks feedback on proposed enhancements to the FASB’s standard-setting procedures that would determine whether the Board should consider differences in accounting standards for private companies within the Generally Accepted Accounting Principles (GAAP).
Under the proposal, the FASB would implement certain improvements to enhance the transparency of its standard setting process for private companies and consider input from private company constituents. To that end, the FASB and AICPA would also sponsor and fund a joint committee to serve as an additional resource to the FASB to further ensure that the views of private company constituents are incorporated into the standard-setting process. The FASB and AICPA are encouraging everyone who plays a role in private company financial reporting – bank lenders, sureties/bond companies, investors, owners and preparers, and practitioners – to review the proposal and comment on it.
“The importance of non-issuers to our capital market system cannot be overstated,” Barry C. Melancon, AICPA President and CEO said in the joint announcement. “While only about 17,000 companies are registered with the SEC, there are over 20 million that are privately held. Private companies play a critical role in job creation and entrepreneurialism.”