Blue-Ribbon Panel Narrows Field for Private Company Financial Reporting
A blue-ribbon panel weighed in on seven alternative models for private company financial reporting, eliminating models based on IFRS and a model that effectively would have maintained the status quo.
All of the remaining models under consideration by the panel would result in differences in Generally Accepted Accounting Principles (GAAP) for privates companies, where warranted, compared with GAAP for public companies.
The panel directed its staff to come back with a narrowed down list of U.S. GAAP-based standard setting models. The models presented by panel’s staff Monday represented several variations of models based on U.S. GAAP and International Financial Reporting Standards (IFRS). The panel agreed to focus in on three of the U.S. GAAP-based models to create two or three hybrid models that are more detailed and focused.
The three primary models that are advancing for more consideration are:
Regardless of which model the panel eventually selects to recommend, several panel members said the group that sets those standards needs to understand the needs of the users for whom they are designing the standards. Most of the panel members expressed discontent with the current makeup of the Financial Accounting Standards Board (FASB) board and noted its heavy — but appropriate — focus on public companies. This was the center of debate on the structure of whatever model is ultimately selected — the current FASB board; a restructured FASB board (with greater private company representation); or a new, separate Private Company Standards Board under the oversight of FAF.
The panel, meeting in Chicago, recommended exposing a series of questions related to the potential standard-setting models for public comment through FASB's website by the end of July to ensure that it isn’t leaving out any critical elements or pieces of information for consideration.
All comments will be made public on the FASB website and the panel’s staff plans to summarize the comments and present them to the panel members at their Oct. 8 meeting.
The 18-member panel, which was announced in December 2009, is tasked with providing recommendations on the future of U.S. accounting standards for private companies by the end of this year. It is part of a joint effort by the AICPA; the Financial Accounting Foundation (FAF), FASB’s parent organization; and the National Association of State Boards of Accountancy (NASBA). Panel chairman Rick Anderson, chairman and CEO of Moss Adams LLP and a current FAF board member, said he would like any recommendations to be ironed out by the panel’s December 10 meeting.
This article has been excerpted from the Journal of Accountancy. View the full article here.