By Anne Rosivach
Nearly 2,500 letters were sent to the Financial Accounting Foundation demanding the creation of an independent separate board to develop different standards for privately held businesses. According to the AICPA's review, 99 percent of privately held businesses are in favor.
For almost forty years, the pleas of private companies that financial reporting standards be set that are more relevant to them often have been ignored. The American Institute of Certified Public Accountants (AICPA) believes that it is time for the Financial Accounting Foundation (FAF) to listen to the constituents who have written to the FAF demanding different financial reporting standards for private companies and a separate independent board to oversee those standards. There are approximately twenty-eight million privately held US companies, accounting for more than 50 percent of our economy.
"Ninety-nine percent of the letters from the privately held company constituency demanded that the FAF create differential standards for privately held companies", said Barry Melancon, AICPA president and CEO. "We have studied this problem for far too long. Over the years, some changes have been made. But the Blue-Ribbon Panel reported that they were insufficient."
In 2009, the AICPA, the FAF, and the National Association of State Boards of Accountancy (NASBA) created the Blue-Ribbon Panel on Private Company Financial Reporting to explore the changes necessary to best meet the needs of US users of private company financial statements. The members of the panel were comprised of a cross section of financial reporting constituencies, including lenders, investors, and owners as well as preparers, auditors, and regulators. On January 26, 2011, the panel presented its report to the FAF. The supermajority of the panel overwhelmingly called for the creation of an independent board, not subject to veto power by the Financial Accounting Standards Board (FASB), to create standards for privately held enterprises.
"While the [AICPA] applauds the recent actions of the FASB to provide relief to private companies, the FAF has yet to agree to a separate board", said Paul Stahlin, AICPA chairman. "Now is the time for the FAF to take the bold step of creating a separate board to set relevant standards that privately held companies sorely need. We call upon more CPAs and business leaders within the privately held company constituency to push the FAF to make these changes."
The FAF and the FASB are making efforts to better understand the issues related to setting standards for private companies. To learn more, read the September 2011 "From the President's Desk" by Terri Polley, FAF president and CEO.