AICPA to FAF: Full Steam Ahead on Private Company Accounting Mattersby
In a letter to the Financial Accounting Foundation (FAF) Board of Trustees on May 8, the American Institute of CPAs (AICPA) urged the FAF to “continue the momentum” of addressing private company financial reporting issues.
AICPA officials also hope that any changes to the future role of the Private Company Council (PCC) – the group established by FAF trustees in May 2012 to work with the Financial Accounting Standards Board (FASB) on determining whether and when to modify US GAAP for private companies – “will not weaken” that effort.
“Regardless of how many constituents take the time to write a letter to FAF, we can assure the FAF, based on our vast contacts with private companies and their public accounting firms, that the FASB/PCC output has been extremely well-received and appreciated, and these same constituents look forward to continued momentum in aggressively addressing private company issues,” wrote AICPA President and CEO Barry Melancon and AICPA Chair Tommye Barie.
FAF trustees on Feb. 26 issued a request for comment seeking stakeholder input as part of a three-year assessment of the PCC’s effectiveness, accomplishments, and future role in private company standard-setting. The comment period ended on May 11.
FAF trustees identified possible improvements to the PCC based on initial informal feedback, some of which the PCC and the FASB have started to implement. Those improvements include:
- The PCC should continue to establish working groups for select FASB projects.
- There should be a consistent and continuous feedback mechanism among the PCC members and FASB members and staff on active FASB projects.
- The PCC should continue transitioning to a body that primarily provides input on active FASB agenda projects.
- PCC members should participate as their schedules allow in outreach performed by the FASB with private company stakeholders.
- The FAF Appointments and Evaluations Committee should continue to seek individuals that have the requisite profile to advise the FASB on active projects.
Melancon and Barie wrote that the PCC cannot become merely an advisory body to the FASB on active projects.
“The PCC should formally decide its project agenda and vote on the need for differences in existing GAAP, and its recommendations for differences in active FASB projects (regardless of whether FASB initially agrees with those recommendations) should be exposed for public comment along with the FASB’s rationale for its decisions regarding those recommendations,” they wrote. “This level of partnership and transparency is necessary to demonstrate that FASB is listening to the needs of the private company constituency.”
The letter also stressed that more work needs to be done with existing GAAP.
“The tone of the request [for comment] suggest to us that FASB’s and PCC’s work on existing GAAP is largely done. If that tone was FAF’s intent, we do not agree,” Melancon and Barie wrote. “FASB and PCC have been doing good outreach with private company constituents to identify existing GAAP topics that should be reviewed by the PCC. Our sense from that continuing outreach, and some of our own in developing this letter, is that FASB and PCC have more work to do on existing GAAP.”
Last month, Billy Atkinson, who has served as chair of the PCC since its inception, announced he would not seek a second term. FAF trustees issued a request for nominations for candidates to succeed Atkinson next January and to fill other potential vacancies on the council.
In their letter to the FAF, Melancon and Barie wrote that Atkinson has “set a high bar” and that the next PCC chair will need to be “a strong, proven leader with an unquestioned dedication and resolve to combat against forces that would seek to derail FAF’s commitment to private company financial reporting.”
The combined efforts of the FAF, the FASB, the PCC, and FASB staff have shown that all parties involved have been listening to private company constituents, and “we believe it will take no less energy and effort to continue the momentum,” the letter concluded.